
<*-« 




BANKING AND CURRENCY LEGISLATION 

REPLIES 

RECEIVED BY THE 

COMMITTEE ON BANKING AND CURRENCY 

UNITED STATES SENATE 



A 



SIXTY-THIRD CONGRESS 

FIRST SESSION 



TO 



QUESTIONS SUBMITTED BY MEMBERS 
OF THE COMMITTEE 



[Printed for the use of the Committee on Banking and Currency] 



f 



WASHINGTON 

GOVERNMENT PRINTING OFFICE 

1913 



Mam 






COMMITTEE ON BANKING AND CURRENCY. 



United States Senate. 



ROBERT L. OWEN, Oklahoma, Chairman. 



GILBERT M. HITCHCOCK, Nebraska. 
JAMES A. O'GORMAN, New York. 
JAMES A. REED, Missouri. 
ATLEE POMERENE, Ohio. 
JOHN F. SHAFROTH, Colorado. 
HENRY F. HOLLIS, New Hampshire. 

James W. 



KNUTE NELSON, Minnesota. 
JOSEPH L. BRISTOW, Kansas. 
COE I. CRAWFORD, South Dakota. 
GEORGE P. MCLEAN, Connecticut. 
JOHN W. WEEKS, Massachusetts. 

Bellek, Clerk. 



Gift from 
Hon. Robert L.Owen 
Nov. 4, 1931 



LIST OF BANKERS AND OTHERS REPLYING TO THE QUESTIONS SUB- 
MITTED BY THE COMMITTEE ON BANKING AND CURRENCY OP 
THE SENATE. 

John McHugh, president, First National Bank, Sioux City, Iowa. 

Fred H. Quincy, president, Planters State Bank, Salina, Kans. 

D. N. Fink, president, Commercial National Bank, Muskogee, Okla. 

A. L. Mills, president, First National Bank, Portland, Oreg. 

Robt. D. Kent, president, Merchants Bank of Passaic, Passaic, N. J. 

Wm. Ingle, vice president, Merchants-Mechanics National Bank, Baltimore, Md. 

Andrew J. Frame, president, Waukesha National Bank, Waukesha, Wis. 

J. R. Mulvane, president, Bank of Topeka, Topeka, Kans. 

S. H. Burnham, president, First National Bank, Lincoln, Nebr. 

James K. Lynch, vice president, First National Bank of San Francisco, San 

Francisco, Cal. 
J. H. Stewart, Wichita, Kans. 
Eugene Marshall, Manchester, Tenn. 

Harry B. Fish, secretary, Peoples Money League, Chicago, 111. 
Karl F. M. Sandberg, Chicago, 111. 
Theodore Gilman, New York, N. Y. 
J. R. Greenlees, Lawrence, Kans. 
Sigmund Feust, president, South Bronx Property Owners' Association, New 

York. 
Carl Pieper, Menominee, Wis. 
James D. Holden, Denver, Colo. 
George G. Merrick, Nyssa, Oreg. 



BANKING AND CURRENCY LEGISLATION. 



QUESTION NO. 1. 

What are the essential defects of our banking and currency system? 

ANSWERS. 

Nonflexible reserA^es. Nonelastic currency. Inadequate discount 
and credit facilities. 

John McHugh, 

President First National Bank, Sioux City, Iowa. 



The essential defects in our banking system are : 
First. Impossibility of concentrating our reserves. 
Second. Our inelastic currency. 

S. H. BlJRNHAM, 

President First National Bank of Lincoln, Lincoln, Nehr. 



I regard the essential defects in our banking and currency system 
to be a lack of concentration and elasticity of both credit and cur- 
rency. 

Fred H. Quincy, 

President Planters'' State Bank, Salina, Fans. 



The essential defects of our present banking and currency sys- 
tem are : 

First. Scattered reserves. The cash resources of the country are 
scattered far and wide in individual bank vaults, instead of being 
mobilized. It is like a city that depends for fire protection upon in- 
dividual water tanks on the top of each and every house, instead of 
upon a central reservoir from which water can be piped to any point 
of danger. 

Second. The inability of our circulating medium to respond to 
the ebb and flow of business; in other words, the inelasticity of our 
currency. 

Third. The inability of our banks to facilitate the commerce of 
the country by rediscounts or by means of acceptances. 

A. L. Mills, 
President First Natioiud Bank, Portland, Oreg. 

3 



4 REPLIES RECEIVED BY THE COMMITTEE. 

The practically fixed volume of circulation when secured by bonds 
regardless of the demand for or supply of money. 

The knowledge always present under existing law that beyond 
a certain limit, usually full, it is impossible to increase the volume 
of circulating medium excepting by resort to extra legal practices 
(the Aldrich-Vreeland emergency currency act is helpful and will 
be useful should occasion require before the enactment of proper 
law) ; unscientific, in that circulation is based upon a credit instru- 
ment — United States bonds, and not gold — in which such notes 
are required to be redeemed if demanded, although banks main- 
tain no gold reserve against them. The reserve laws, which, in invit- 
ing pyramiding of reserves and credits at the same time give im- 
proper advantage to banks in reserve cities, and especially in the 
central reserve cities. 

Wm. Ingle, 
Vice President Merchants-Mechanics National Bank, 

Baltimore, Md. 



The essential defects of our banking system are not material. Our 
currency system alone is defective, as it lacks flexibility to relieve us 
in abnormal periods. In normal times rigidity of currency issues is 
practically immaterial. 

Andrew J. Frame, 
President Waukesha National Bank, Waukesha, Wis. 



Lack of elasticity and the fact that it is not in harmony with the 
business of to-day. 

J. R. MlTLVANE, 

President Bank of Topeka, Kans. 



(1) The currency. — Based on the funded debt of the United States, 
and has consequently no relation to the commercial requirements 
of the country. The profit to the banks in issuing circulating notes 
is greatest when the price of Government bonds is low, and the 
greatest profit is obtained by keeping the notes out, so that there is a 
tendency to expand the circulation to the limit in times of prosperity, 
with no tendency to contract. There is consequently no resource 
available when a period of financial strain causes an excessive demand 
for currency. 

(2) Legal-tender notes. — A relic of the war, which entailed an 
enormous loss upon the Government and upon the people of the 
United States during the time of their issue and greatest circulation, 
and which are still a constant source of loss in the necessity for main- 
taining a reserve against them, and at intervals selling bonds to 
maintain the reserve. They are promissory notes and should be 
canceled when paid. 

(3) The reserves. — Fixed in amount by law regardless of local 
conditions. Scattered throughout the country, and consequently 
unavailable for use at points where and when needed. They should 



EEPLIES RECEIVED BY THE COMMITTEE. 

be massed at strategic points where they would be available. Con- 
centration of reserves does not mean concentration of credit ; actually 
the reverse. 

(4) The Government's hoards of gold withdrawn from commercial 
use and greatly limiting the credit possibilities of the banks. 

(5) Permission to accept time drafts should be granted to the 
banks in the leading commercial centers to enable the financing of 
the importation of foreign merchandise. 

James K. Lynch, 
Vice President the First National Bank of San Francisco. 



Principally inability to expand and contract automatically with 
the demands of the times. 

J. H. Stewart, 

Wichita, Kans. 



The greatest defect in our national banking system is in the reserve. 
The currency plan is also defective. 

Eugene Marshall, 

Manchester, Tenn. 



The most essential defect of our financial s} 7 stem is that it is 
privately instead of publicly owned, controlled, and managed. As a 
consequence it is arranged for private profit instead of for public 
use. This defect leads to all the others, such as usurious interest 
rates, uncertainty of supply, discrimination in loans, panics, etc. 

Karl F. M. Sandberg, 

Chicago. 



We are trying to carry on a credit system without the support of 
a credit currency. 

Both State and National Governments have established and legal- 
ized the credit system of banking; that is, banks are authorized to 
receive deposits and loan 75 per cent thereof and retain in cash 25 
per cent to meet the demands of depositors to whom the banks owe 
100 per cent. 

This is the credit system, and it is based on a calculation of proba- 
bilities. It is not probable that more than 25 per cent of deposits 
will be demanded at once, and meanwhile the banks will be able to 
collect in money due them to meet further demands. 

But extraordinary demands are likely to occur and some provision 
must be made to meet them. 

Our credit system makes no provision beyond the cash reserve, and 
when that is invaded the banks must force collections to preserve 
their solvency. Merchants must rudce their stocks in trade to raise 
cash to meet their paper, and if a combination of alarming events hap- 
pen at the same time the banks are compelled to continue the forced 
liquidation even if it causes a complete prostration of the mercantile 
community. This situation is called a monetary panic. The cause 



6 REPLIES RECEIVED BY THE COMMITTEE. 

of such a calamity is the struggle of the banks to maintain the cash 
reserve required by law. There is no credit currency in our system 
and all demands for money for any purpose must be met by drafts 
on the reserve of lawful money. 

It is evident that if a safe credit currency could be provided by 
law all domestic calls for money could be met thereby and the dis- 
turbance caused by a decline of the legal reserve to or below the 
" apprehension minimum " would be avoided. 

So it must appear that the essential defect of our banking and 
currency system, and there is but this one, is that we are trying to do 
a credit business without a credit currency. 

Theodore Gilmax. 

New York. 



The essential defects of our banking and currency system (if it 
may be called a system) are that under our present laws we have some 
25,000 individual institutions, each with no relation to the other, all 
having practically the same powers so far as ability to protect them- 
selves is concerned, and no head provided that is obligated to protect 
the sound, honestly managed bank in an emergency, or in case there 
is need for more funds than the local bank is able to furnish. This is 
the greatest defect, and is responsible for most of the conditions, to 
which we object, that have grown up under our present laws. Be- 
cause of this weakness we are compelling each individual bank to 
carry its own reserve, which is virtually as foolish as if we were to 
pass a law compelling every man in the United States to carry his 
own fire or life insurance reserve. You know about how effective 
that would be. 

J. R. Greexlees, 

Lawrence, Kans. 

Originating as a war measure conceived and put in practice to 
enable the Nation to prosecute war, it has left the people after the 
restoration of peace in one continuous, economic struggle ever since 
increasing and decreasing intensely more or less. 

SlGMTTXD FeTTST, 

President South Bronx Property Owners' Association, 

New York City, N. Y. 



That the money necessary to do the business of the country is 
issued through the banks and not to the people direct (by the people 
we mean such units of our established Government as are now 
authorized to levy taxes, as States, counties, cities, and townships), 
thereby putting the banks in absolute control of our currency. 
" Show me who controls your money and I will tell you who rules 
your people." 

Carl Pieper. 

Menomonie. Wis 



Our currency system is one thing, our banking system another. 
They should not be confounded, but should be considered separately. 



REPLIES RECEIVED BY THE COMMITTEE. 7 

Our banking system exists only because of our imperfect currency 
system. 

The essential defect of our currency system is a currency deficit 
exceeding the enormous sum of fourteen thousand million dollars 
(about $140 per capita), as shown by a correct interpretation of the 
latest report of the Comptroller of the Currency. 

The defects of our banking system are due to this dearth of Gov- 
ernment money. 

James D. Holdex. 

Denver, Colo. 



The defects of the present so-called national-bank system are many. 
It is sufficient to say that it is a panic-breeding, trust-creating 
scheme — a device of the banks, by the banks, and for the banks, who 
are by it constituted a privileged class. 

Geo. G. Merrick. 

Xyssa, dreg. 



QUESTION NO. 2. 

Enumerate concisely its advantages and disadvantages. 

ANSWERS. 

Principal disadvantages are set forth in answer to question No. 1. 
Advantages are many but insufficient and not nearly what they could 
be for the general business of the country if our laws were properly 
remedied. 

John McHugh, 
President First National Bank, Sioux City, Iowa. 



We do not want a central bank with branches as in European 
countries. Our independent banking system is all right, providing 
we can have a central organization where a part of our reserve can 
be centralized, so that in the aggregate it would be a large sum and 
would be available quickly in an emergency. It would prevent 
money panics. 

That condition, together with the right for such a central organi- 
zation to issue currency on strict commercial paper, under control 
of a conservative board made up of experienced, practical bankers, 
together with the Secretary of the Treasury and the Comptroller of 
the Currency, would put us in much better shape than we are under 
our present condition. 

S. H. BURNHAM, 

President First National Bank of Lincoln, Lincoln, Nebr. 



To my mind, the great advantage of our banking system is its 
individual, independent, and local ownership and management. To 
my mind, there is no single agency that has done more to build up 
and extend civilization and commerce in this country than this one 
condition in its banking system. The management and ownership 
of nearly every bank in the United States is local and the bank with 
all its resources, which are largely local, are used for the upbuild- 
ing of the community in which it is located, and in my opinion it 
would be a sad thing to see this changed in harmony with the branch 
banking systems of other countries to any extent. The disadvantages 
of our banking system are included under No. 1. 

Fred H. Quincy, 
President Planters'* State Bank, Salina, Kans. 



REPLIES RECEIVED BY THE COMMITTEE. 9> 

The advantages of our present system over banking methods in 
vogue before the national-bank act became a law are so apparent to 
every student of finance that enumeration is unnecessary. Chief, 
however, is the fact that it has given us through the national-bank 
notes a circulating medium the value of which has never been ques- 
tioned, and that has well carried out the objects of the originators. 

The essential disadvantages are set forth in reply to question 
No. 1, to wit: Scattered reserves; elasticity; failure to provide 
banks with the authority to accept drafts. 

A. L. Mills, 
President First National Bank, Portland, Oreg. 



Advantages under present banking laws are principally with 
banks in central reserve cities where in the presence of a concentra- 
tion of reserves full benefit is had of the artificial situation created 
by law. Practically all other advantages have disappeared with the 
lapse of time since the Civil War, which gave birth to our present 
system. 

Disadvantage — a redundant supply of circulation during, say, six 
months in each year, resulting in speculation and investment of funds 
in unsafe directions simply to keep them employed, and from which 
they can not be withdrawn. 

Wm. Ingh, 
Vice President Merchants-Mechanics National Bank, 

Baltimore^ Md. 



None that any other system could not offer. 

Its disadvantages are the rigidity of our currency, there being too. 
much in times of dull business and too little when business is active, 
and that it has not expanded commensurately with the growth of 
business of the country. 

J. R. MULVANE, 

President Bank of Topeka, Kans. 

The disadvantages have been already stated; the advantages are 
less obvious. An excellent system of individual banks has grown 
up under the national banking laws, but the banks have no coherence,, 
no method of protecting their reserves in times of excessive with- 
drawal, and at such times are as helpless as an undisciplined and 
unguided mob. 

James K. Lynch, 
Vice President First National Bank of San Francisco. 



Its advantages are that all kinds of money are equally good and 
acceptable, and its disadvantages, as stated in No. 1, namely, princi- 
pally inability to expand and contract automatically with the de- 
mands of the times. 

J. H. Stewart, 

Wichita. Kans^ 



10 EEPLIES EECEIVED BY THE COMMITTEE. 

The reserve system is objectionable for the reason that it con- 
centrates vast amounts of money in the custody of the banks of the 
reserve cities and provides no adequate security for its safe-keeping 
or return. 

The great banks of the reserve cities are largely controlled in the 
interests of the great trusts, and the bank reserve is the source of 
their largest and most reliable money supply. 

This same bank reserve has been the nursing mother of the gam- 
bling stock exchange. 

Three times the reserve banks, by a mutual agreement which 
deserves the name of conspiracy, refused to pay reserve depositors 
in money, and in so doing placed a great majority of the banks of 
the United States in a position of at least technical bankruptcy. 

Bankers who recollect 1873, 1893, and 1907 have no wish to repeat 
the experience. 

Eugene Marshall, 

Manchester. Tenn. 



The national-bank note has always been accepted on the credit of 
the United States Treasury, never as an obligation of the bank which 
it pretends to represent. 

The system which makes these notes a first lien on all the assets 
of the bank is unjust to the depositor, as it virtually makes him a 
partner in the business of the bank, and in case of failure materially 
reduces the pro rata dividends. 

The national currency has never been popular with the common 
people, who regard the interest-paying bond security as a special 
privilege allowed to the banks at the expense of the people. 

An attempt was made once to organize a boycott against the 
national currency, and it only failed in consequence of the one re- 
deeming feature— ^the national-bank note never defaulted. 

Eugene Marshall, 

Manchester, Tenn. 

Its main advantage is immense profit and privileges to those few 
who control it, but there are corresponding disadvantages to the 
other 99 per cent. To these the only advantage is that it supplies 
the circulating mediums, which our Congresses persistently have 
refused to supply. But these mediums on the other hand are sup- 
plied at extortionate rates and subject to the whims of private 
control. 

Karl F. M. Sandberg, 

Chicago. 

If a safe credit currency can be established, the banking system 
of the United States would lead the world. 

Our banking system is the result of a struggle against monopoly 
and in favor of making the trade of banking free to all under a 
general law. The struggle is not entirely won, but it is evident that 
the monopoly contained in the plan recommended by the National 
Monetary Commission January, 1912, has been definitely rejected 
by public disapproval and the action of the great political parties. 



REPLIES EECEIVED BY THE COMMITTEE. 11 

The New York free banking law of 1838 was the logical sequence 
to the principles of the Declaration of Independence. It was enacted 
only after a strenuous contest, but it settled the question against 
monopoly in this country forever. 

The advantages to the people contained in our banking laws are 
overwhelmingly in its favor and can never be taken away from 
them. 

There was not enough light on the banking question in 1838 to 
formulate a plan without some defects, but they are adventitious, 
and subsequent experience in banking has shown how they may be 
easily removed. 

The chief disadvantage is in a bond-secured currency, which 
experience has shown is not responsive to the demands of business. 
And yet in 1838 it seemed the only way in which a free banking- 
system could be established. 

The principle underlying a bond-secured currency is not in the 
character of the security pledged, but in having the services of a 
trustee to act on behalf of the note holder. It is evident that if 
numerous banks are to be started all over the country, public safety 
requires that they must deposit with a trustee security for the notes 
they are authorized to issue. 

So while the defects of a bond-secured currency are acknowledged, 
the services of a trustee must be recognized as essential in a system 
of free banking, the benefits of which are to be diffused in all parts 
of the country and not to be monopolized by any one section or 
powerful moneyed combination. 

Theodore Oilman, 

New York. 



Practically the only advantages which we can show under our 
present system of banking laws lie in the fact that our individual 
banks, being locally owned and locally managed, can and do know 
better the needs of the community and what should be done in 
caring for them than a branch of any large bank could do. The 
disadvantages come from the absolute lack of power of the indi- 
vidual unit to protect itself, to say nothing of caring for its neigh- 
bors. 

J. R. Greenlees, 

Lawrence, Kans. 



Advantage: Absolute security of the national-bank notes; saving 
of exchange cost. 

Disadvantage: The exclusion of State bonds and other securities, 
and the restriction to United States bonds as security deposit for the 
circulation. 

(b) The creation of a power thereby as strong at least if not 
stronger than the Government itself. 

(c) The subversion of legitimate enterprise and competition and 
the replacing of these by monopolies and trusts. 

This is not to be considered as a plea to allow privately or similarly 
owned railroad companies' mortgage bonds as a substitute, as long 
as no radical change is made. 



12 EEPLIES RECEIVED BY THE COMMITTEE. 

The advantage of security which the present national-bank cur- 
rency has is very costly to the people and outweighed by the aid it 
has furnished in the formation of a money trust. 

(d) Curtailing of the working forces of the Nation. 

(e) The complete creation of money and other trusts, made pos- 
sible only by the aid of the banking laws. 

(/) Insufficiency and failure to accomplish the purposes for which 
banking and currency exists, viz, to facilitate exchange and credit 
-enterprise and prevent panics. 

(g) It prevents the middle and lower classes from action to aid 
themselves by their own initiative. 

Sigmund Feust, 
President South Bronx Property Owners' Association, 

New York City, N. Y. 



The advantages are all on the side of the bankers, as our present 
•system gives them complete control of the business of the country 
by withholding or extending credit. All the panics since 1864 were 
caused by our present national banking and defective currency sys- 
tem. This was plainly shown in the panic of 1907 when the large 
eastern bankers completely paralyzed the business of the whole 
country. The millions of money deposited in the banks by the people 
could not be touched by their owners. These same bankers compelled 
all the millions in the United States Treasury to be put at their 
disposal; and the President of the United States, that proudest of 
all Americans, Theodore Koosevelt, was brought to his knees, and 
he promised them immunity from prosecution in their lawless acts 
in absorbing the southern steel industry. This certainly was an 
advantage to the bankers, as it made them complete masters of our 
Government, The disadvantages to the people other than bankers 
are too many to enumerate. Millions of people were thrown out of 
employment. Here in Wisconsin thousands of men Avere sent home 
from the lumber camps because the contractors were informed by 
their bankers they could not let them draw their own (the con- 
tractors') money. Thousands of business men were bankrupted, and 
business was completely paralyzed. What greater adAantage to the 
bankers and what greater disadA^antage to the people could anybody 
desire ? 

Carl Pieper, 

Menominee^ Wis. 



QUESTION NO. 3. 

What are the chief purposes to be attained in an improved system ? 

ANSWERS. 

The chief purpose to be attained in remedying existing law is to 
make it possible for the credit needs of the producer, be he a farmer, 
stock raiser, or other, to be available until consumption or exporta- 
tion of that which he produces enables him to liquidate obligations 
incurred in production. To attain this purpose it ought to be possi- 
ble for his banker to realize, in proper amount, credit or currency, or 
both, upon the obligation in proper form of the producer at a central 
or district reserve bank. 

John McHugh, 
President First National Bank, Sioux City, Iowa. 



The chief purposes to be attained are : 

Centralization of our reserves. 

The means of securing currency to meet the demands of business. 

The cooperation of the banks. 

S. H. BUENHAM, 

President First National Bank of Lincoln, Lincoln, Neor. 



The chief purposes to be attained in an approved system, in my 
opinion, are concentration and elasticity of reserves, both in credit 
and currency, and better protection to bank depositors. 

Fred H. Quincy, 
Presient Planters'' State Bank, Salina, Kans. 



The chief purposes to be attained in an improved banking and cur- 
rency system are: To concentrate the scattered cash resources of the 
country ; to prevent the pyramiding s of bank reserves ; to provide, under 
proper restrictions, for an elastic currency that will respond to the 
demands of commerce; to expedite business b}^ granting banks the 
right of accepting drafts; to provide a central source, or sources, 
where banks may rediscount commercial paper without evoking 
criticism of the solvency of the bank. 

A. L. Mills, 
President First National Bank, Portland, Oreg. 

13 



14 EEPLIES RECEIVED BY THE COMMITTEE. 

Divorce of the Government from the business of banking except- 
ing only in its very proper capacity as overseer and regulator under 
a law which, in making for safety both to banks and the public* 
should prevent exploitation of either by unscrupulous or selfish 
individuals. 

Wm. Ingle, 
Vice President Merchants-Mechanics National Bank, 

Baltimore, Md: 



To secure elasticity and a better reserve system. 

J. R. MlJLVANE, 

President Bank of Topeka, Kans. 



(1) The establishment of a note issue which shall be directly re- 
sponsive to the commercial requirements of the country, and which 
shall be based, not upon the fixed investments (bonds, real estate, 
etc.). but upon the liquid commercial assets. 

(2) The restoration of the Government hoards to commercial use, 

James K. Lynch, 
Tire President the First National Bank of San Francisco. 



Greater security and elasticity. 

J. H. Stewart, 

Wichita, Kans. 



The chief purpose to be attained is security for bank reserves and 
ultimate security for bank depositors. 

Also to secure a currency always available to the smaller banks and 
to business men. 

Eugene Marshall, 

Manchester, Tenn. 



The chief purposes to be attained in an improved system are : 

1. To arrange for the creation by the Government of Government 
money to finance Government works independent of private capital. 

2. To furnish a sufficient medium of exchange, avoiding the neces- 
sity of interest-bearing loans. Sufficient useful and products Gov- 
ernment work paid for by Government money is all that is required 
to furnish a sufficient medium of exchange. This will also prevent 
unemployment. 

Karl F. M. Sandberg, 

Chicago, 

There is Due one chief purpose to be attained in an improved sys- 
tem. It is to supply a credit currency as an adjunct to our credit 
system. As long as we lack a credit currency we must expect trouble. 
It is inevitable. 



REPLIES RECEIVED BY THE COMMITTEE. 15 

All other disadvantages are trivial and unimportant compared to 
this. 

The question is how shall this credit currency be issued. 

The banks in the New York Clearing House have answered this 
question for us and have set us an example which is so perfect that 
all we have to do is to adapt it to the public. The banks have made 
a currency between themselves which is so strong and good that no 
iosses have ever been recorded in its issue. 

That is the kind of currency the public want. No currency can be 
too good for them. The banks can not take the position that when 
they make a currency for themselves they make it absolutely good, 
but when it is made for the public an inferior article will answer just 
as well. 

That it is possible to adapt the methods of the New York Clearing 
House to the country at large is shown by the inclosed bill, which 
was introduced by Senator Thomas C. Piatt in the third session of 
the Sixtieth Congress. I inclose also an argument submitted to the 
Senate Finance Committee at that time. 

This bill is simple in its operation and entirely practical and has 
received the approval of many bankers and business men. 

The objections to the bill are many. The chief is that the banks 
do not want to cooperate for the benefit of the public, and they do 
not want the supervision of Congress over the affairs of the clearing 
houses. These objections should have no weight with Congress when 
a great public good is proposed. 

In order to set before the committee a full answer to this question 
I append hereto copies of my books, as follows : A Graded Banking 
System, published in 1898, on page 130 begins the text of my first 
bill to incorporate clearing houses, introduced in the House of Rep- 
resentatives January 7, 1896. On page 152 is given my first article 
proposing the incorporation of clearing houses under a Federal 
law, as published in the Bankers' Magazine September, 1893. I have 
therefore been advocating this measure for 20 years. While many 
have written on this subject since 1893, I do not know that anyone 
else has framed a bill to carry the idea into effect. 

Federal Clearing Houses, published in 1899. In a hearing before 
the House Committee on Banking and Currency, given on pages 22 
to 148, you will find The Remarkable Accounts of the Bank of 
France, page 115, and the speech of Mr. Goschen after the Baring 
failure, which I had copied from the London Times at the Astor 
Library, pages 124 to 148. This copy has value because Mr. Goschen 
changed the text somewhat when he published it in his book. 

In further answer to this question I would respectfully refer the 
committee to my article in the North American Review of August, 
1908, on the Aldrich-Vreeland bill. 

I prepared bills which were introduced in the Fifty-fourth, Fifty- 
fifth, Fifty-seventh, and Sixtieth Congresses, all on the same subject 
and with the same object. Changes were made as the result of dis- 
cussions with Members of Congress and bankers, so that the bill 
introduced by Senator Piatt is in better form than those which 
preceded it. 

In order that the committee may know some of the opinions ex- 
pressed regarding this plan, I append the following : 

3056—13 2 



16 EEPLIES RECEIVED BY THE COMMITTEE. 

The Banking Law Journal, New York, said editorially: 

We think Mr. Theodore Gilinan's book upon A Graded Banking System affords 
a solution of the problem. 

The North Western Banker, Des Moines, Iowa, said: 

The plan as proposed by Mr. Gilman is the best yet brought forward for the 
prevention of panics. 

The Bankers' Magazine, New York, said: 

When Congress shall take up the currency question with a disposition to deal 
seriously with the subject, the proposals of Mr. Gilman will be found worthy 
of careful consideration. 

The New York Tribune said editorially: 

Of all the plans for the adjustment of the bank circulation to the needs of 
business, the one which seems to furnish a better basis for wise and safe action 
than any other yet offered is that urged by Theodore Gilman, of this city, and 
approved by Charles Parsons, of St. Louis, Mo., formerly president of the 
American Bankers' Association. 

A. M. Peabody, of St. Paul, Minn., said: 

At reserve centers the banks could form themselves into a cohesive condition, 
capable of resisting panic, mitigating trade depressions, and supporting the 
confidence of depositors. The incorporation of the clearing house would give 
the association of banks a legal status. 

The late Henry D. Lloyd, author of A Country Without Strikes, 
etc., wrote Mr. Gilman as follows: 

You have, I think, in your plan made the most important contribution to 
practical finance that has been proposed by any financial writer of modern 
times. 

The Review, a financial journal published in Sydney, Australia, 
said: 

For the provision of an elastic currency in the United States we have seen 
no more suitable scheme than might easily be made out than that suggested by 
Mr. Gilman. We shall watch its course with interest, and have pleasure in 
saying that, in our opinion, the world is indebted to Mr. Gilman in no small 
measure. 

R. S. Paden, in the Journal of Political Economy, Chicago, wrote : 

There is need of a measure, authorized by law, that will be effective through- 
out the Union, in relieving the strain of credit contraction forced on the banks 
under our present system. Mr. Gilman's book is a strong presentation of the 
merits of his plan, and in view of the great importance of an elastic currency 
in our monetary operations it behooves those opposed to this, or who have rival 
plans, to show the weakness of his cause. 

The New York Evening Post, in an editorial on " Federal clear- 
ing houses," said: 

If the object of the (Gilman) bill could be carried out, the country be 
grouped into national clearing-house associations of sufficient size, there is no 
doubt that notes issued upon the combined responsibility of these associations 
would be perfectly secure. 

Prof. Joseph French Johnson, now of the University of the City of 
New York, in a review of the " Graded banking system," said : 

As a protection against panics due to a dearth of media of exchange, his 
(Mr. Gilman's) system would undoubtedly prove effective. 

In a subsequent letter to Mr. Gilman he wrote : 

It may interest you to know that Secretary Gage asked me not long ago if I 
had read your book. He said I really ought to read it, for it contained about 
the best scheme for an asset currency which he had seen. It should give you 



REPLIES RECEIVED BY THE COMMITTEE. 17 

some satisfaction (continued Prof. Johnson) to know that you have made so 
distinguished a convert. 

Subsequently, at the December, 1900, meeting of Group VIII of 
the New York State Bankers' Association, Lyman J. Gage, then 
Secretary of the Treasury, discussed a combination of banks without 
monopoly. He said it may be possible to secure the advantages of 
centralized authority and power while avoiding this apprehended 
danger. He said : 

The operation of your own (New York) clearing house in times of peculiar 
stress and peril typifies what may be realized along the broader lines to which 
I refer. Is it not possible under the sanction of law to perfect and extend for 
the general good of the country a similar plan and one which has been so well 
demonstrated? 

The Bankers' Magazine, in commenting editorially on this speech 
of Secretary Gage, said: 

Mr. Gage did not wish his hearers to understand that this idea was original 
with him. Mr. Walker, of Massachusetts, and Mr. Gilman, of New York, and 
doubtless others, have suggested something on the same line. Mr. Gilman's plan 
was fully explained in the magazine for April, 1899, pages 515, 594. If the banks 
are ever permitted to issue their own notes, it will be essential that the notes 
put out by an obscure country bank shall be practically as good as those of a 
bank in any of the financial centers. This can, perhaps, be best assured by 
some Dlan. such as Mr. Gage outlined. 

OPINIONS OF SMALL BANKS. 

C. F. Bendy, cashier of the First National Bank of Grand Island, 
Nebr.; capital, $100,000. He wrote: 

I am thoroughly in favor of concentrating all efforts in regard to currency 
reform on ah attempt to secure legislation that will permit the issue of emer- 
gency currency by clearing houses. 

J. B. Thomas, vice president American Bankers' Association for 
Missouri. Bank of Albany, Mo. ; capital, $30,000. 

My reasons for thinking favorably of your measure are various. First, I 
like the plan of clearing-house issues over the country, as they come nearer 
the people and the smaller banks. Second, I think the security proposed would 
be ample to protect the notes and would make them as certain of payment as 
the present mode of issuing national bank currency. Third, I especially coin- 
mend the measure because it leaves every bank, no matter how small, main- 
taining its separate existence, while some of the other plans do not. 

Theodore C. Stevens, vice president American Bankers' Associa- 
tion for Ohio: 

I beg to state that I have no objection whatever to the use of my name as 
one who is unqualifiedly in favor of such a measure as you propose. The 
country is alive to the necessity of an emergency currency and I believe the 
present Committee on Banking and Currency will recommend some measure 
during the session. I hope it will be your bill. 

J. N. Barnes, president Minnesota Title Insurance & Trust Co., 
Minneapolis, Minn., wrote: 

I wish to compliment you upon the conception of this plan. The idea is bril- 
liant and upon the face of it the plan is attractive. 

II. E. Jones, vice president American Bankers' Association for 
Virginia ; president of the Dominion National Bank, Bristol, Va. 
He wrote to Members of Congress for Virginia as follows : 

Herewith I inclose statement of Theodore Gilman, explaining his bill intro- 
duced into Congress, which appears to be one that should receive the support 
of the bankers of the country. 



18 REPLIES RECEIVED BY THE COMMITTEE. 

Action of Washington State Bankers' Association, held at New 
Whatcom, Wash., July 23, 24, 25, 1903 : 

In a discussion on the currency, A. L. Mills, president of the First 
National Bank of Portland, Oreg., the largest bank north of San 
Francisco, said: 

When a good hard panic strikes the country, self preservation becomes the 
first law ; every bank for itself and the receiver takes the hindmost. 

Hon. E. O. Graves, vice president Washington National Bank of 
Seattle, said : 

The true remedy is asset currency, secured on the credit of the bank. 

Theodore Gilman, of New York, followed, advocating the issue 
of currency through clearing houses incorporated under a Federal 
law. 

On the 25th of July, the convention adopted the following reso- 
lution : 

Resolved, That the Washington State Bankers' Association express its hearty 
indorsement of the efforts being made to amend our present banking laws so 
as to provide a thoroughly scientific system of currency that will prove respon- 
sive to the requirements of business, automatically expanding and contracting 
according to the demands of trade and commerce, and to that end we favor 
a clearing-house emergency circulation. 

The Seattle Daily Times, of July 25. said editorially : 

The argument advanced by Theodore Gilman, in favor of a clearing-house 
emergency circulation was the most forceful and clearest presentation of the 
question before the convention, and would meet with the largest general ac- 
ceptance of any of the plans offered. 

The attention of the public is returning to the clearing-house plan, 
as evidenced by an editorial in the New York Times of June 18, 1913, 
on " Banking Keserves and Bank Credits," in which it is said : 

This (reform) can be done, not by an entire recasting of the laws, but by a 
process of evolution, by building upon the basis and practice of the country's 
clearing houses. The change would not be radical, it would involve not crea- 
tion of entirely new banking machinery, for the country is already familiar 
with the work of the clearing houses ; it understands how admirably they have 
performed their usual functions and with what courage and resourcefulness 
they have met the demands put upon them for the protection of the country's 
business in times of stress. 

Theodore Gilman, 

New York. 



The chief purposes that should be desired in an improved system 
are : A unification of the combined banks and their reserves into one 
common head, making every bank in the United States virtually a 
branch of this central organization, yet leaving each unit its present 
local ownership and local management. This head should be obli- 
gated to carry the gold reserve for all of the other banks and for the 
Government of the United States, and should be the sole bank of 
issue, and in addition should be a bank of discount, with dealings 
limited to the National Government and the other banks of the 
country. This head, whatever name it may be called, should have 
for the convenience of the public a branch in every reserve center in 
the United States, that the banks of that district could deal directly 
with, without any inconvenient arrangement, and so far as possible 



REPLIES RECEIVED BY THE COMMITTEE. 19 

the banks of the United States should carry Avhat reserve they require 
in the vaults of this central organization or head to the banking 
system. 

J. R. Greenlees, 

Lawrence, Kans. 

(a) To alleviate, improve, and remedy the state described in an- 
swer to question No. 2. 

(b) To create a banking system and facilities in aid of the com- 
mon people for the poorer and middle classes, traders, manufac- 
turers, builders, etc., and nonmillionaires, preventing usury for the 
benefit of those classes who are the real sinew and bone of the 
country, like the farmers, those who are outside trusts and combina- 
tions, instead of as now for the railroad gatherers, etc., and multi- 
millionaires, who should be prevented from controlling and using 
the resources which should be used to aid the classes stated in the 
first part instead of as now to crush them. 

One of the chief purposes rests in the misappropriations in which 
the savings of the people as gathered by life insurance companies and 
the like are used to crush the smaller and legitimate trader, manufac- 
turer by the aiding and supporting of trusts. 

Sigmund Feust, 
President South Bronx Property Owners' Association, 

New York City, N. Y. 



The chief purpose to be attained is a supply of Government full 
legal tender currency sufficient to the needs of our country (not for 
the purpose of being loaned to China or to invest in Mexico), that 
all those of our citizens who are willing to labor and produce wealth 
may be employed at all times at a fair wage; that the farmer may be 
paid a fair price for the product of his farm and that the real 
wealth producer is not robbed of the reward of his labor by the 
manipulations of the speculator in money. 

Carl Pieper, 

Menominee, Wis. 



A perfected currency system would eliminate the universal interest- 
paying custom — the custom of paying " interest " for a circulating 
medium when obtained on pledge of security. 

The following reasoning justifies this conclusion, viz: 

The individual " borrows " only such things as he needs and does 
not own. When it is impossible to own, he must borrow the thing he 
needs or do without it. The thing that everyone needs in complex 
society is a circulating medium. It can not be generally owned so 
long as a sufficient supply is not in existence. Those who have it not 
must borrow and pay " interest " to those who have a surplus. Thus 
the universal currency shortage begets the universal interest-paying 
custom. What an insufficient currency begets a sufficient currency 
will eliminate. 

" Credit " is the only available substitute for money. " Bank 
credit " is the best substitute because the most available. It is the 



20 REPLIES RECEIVED BY THE COMMITTEE. 

commercial equivalent of cash. It dwells in the leaves of the bank 
ledger. It circulates in the form of " checks " and " drafts." 

The dearth of Government money creates a great demand for this 
private substitute — a demand which enables those who can supply 
it to exact for its use a charge called " interest." 

We literally force ourselves to use and pay interest for bank 
credit by failing to provide a sufficient volume of Government 
money — a volume that would permit the followers of useful pursuits 
to acquire and own the money they need to gratify their reasonable 
wants and to " finance " their commercial undertakings. 

So long as there is a great currency deficit only a smell per- 
centage of society can possess and own the currency each one needs. 
Were a sufficient supply in existence, the industrious would naturally 
acquire their quota, be it much or little. 

To realize that the interest we collectively pay each year on the 
fourteen billions of bank credit now in daily use exceeds the value 
of the entire surplus product of our every industry (as indicated by 
the annual increase in national wealth) is to partially appreciate 
the defects of our financial system. 

Our $14,000,000,000 currency deficit is traceable to the fact that we 
grant to owners of wealth, in the form of gold bullion and national 
bonds, a right we unwittingly deny ourselves ; i. e., the right to have 
our property values monetized by the certificate process, on applica- 
tion, free from an interest charge. 

When the owner of gold bullion Avishes to have his form of wealth 
converted into coin or representative money (coin certificates) the 
present currency law permits him to do so at a nominal charge. 
Owners of Government bonds were given the same right in 1864 
under the national banking act. Every other wealth owner, how- 
ever, is denied this essential right by the provisions of the currency 
law; a law wdiich enables gold owners and certain bond owners to 
have their wealth converted on application from a form in which it 
will not command "interest " in the market into a form in which it 
will. 

Our currency system therefore is defective in the particular that 
it unduly restricts the supply of representative money by wrongfully 
confining the issue to the owners of these two forms of wealth ; thus 
rendering the indispensable circulating medium so inaccessible to the 
many, to whom it is a necessity, that it and its credit substitute com- 
mands a price in the market that absorbs the surplus fruit of toil as 
fast as it is produced. 

" Kepresentative money," whatever its material, is absolute money 
when invested by law with all the legal powers of specie; that is to 
say, when endowed with the full legal-tender quality that is im- 
parted by law to metallic coins. Such currency, like coin, then has 
a market value for an exceptional use equal to its denomination, viz, 
for adjusting accounts, for facilitating exchanges, and for conserv- 
ing individual earnings. 

Because of its unchanging value for these uses, legal-tender cur- 
rency effects exchanges on the basis of the relative and fluctuating 
value of the articles exchanged. Being the only thing that has a 
fixed value for any purpose, we utilize it as an exchange medium. 
Worth one, five, or ten dollars for adjusting accounts, the money 



EEPLIES RECEIVED BY THE COMMITTEE. 21 

symbol is the exchange equivalent of commodities worth a like sum 
for other uses. It is worth its face value for paying debts and taxes 
whether " redeemable in gold " or not. 

Certain forms of imperishable wealth have ever been the basis of 
the currency issues of the civilized world, viz, gold, silver, and (in the 
United States) Government bonds. To increase the currency, with- 
out departing from the accepted principle of currency issue, it is 
only necessary to enlarge the property basis against which currency 
certificates are issued for commercial uses on application of the 
owner. 

A simple, conservative, and practical method of supplying the 
present deficit would be to enact a law making improved real estate 
intown and country eligible to monetization by the certificate process 
at a permanent abritrary valuation, in addition to gold, silver, and 
Government bonds. Note the fact that gold and silver are monetized 
by the certificate process as effectually as by the coinage process. 

The vision of an " inflated currency," which the proposal to issue 
$14,000,000,000 of new Government money suggests to the average 
intellect, gradually fades away as the inquiring mind realizes that 
such an increase of tangible currency does not necessarily mean an 
equal increase in the circulating medium. To appreciate the fact 
that the circulating medium with which the present business of the 
country is transacted consists of about 3,000,000,000 of cash and 
some $14,000,000,000 of bank credit is to perceive that a substitute of 
cash for the bank credit we are using would not increase the actual 
circulating medium, and therefore would not unduly inflate prices. 

James D. Holden, 

Denver, Colo. 



The purposes to be obtained by an improved system should be 
justice to all, special privilege to none. 

Geo. G. Merrick, 

Nyssa, Oreg. 



QUESTION NO. 4. 

Should national banks continue to have a bond-secured currency? 

ANSWERS. 

National banks should not continue to have bond-secured currency 
any longer than a proper change can be made without business dis- 
turbance. This change should be worked to gradually. 

John McHugh, 

President First National Bank, Sioux City, Iowa. 



I see no reason why a portion of the currency may not continue to 
be secured by Government bonds. 

S. H. Burn ham, 
President First National Bank of Lincoln, Lincoln, Nebr. 



I do not think the national banks should continue to have the ex- 
clusive advantage of bond-secured currency, if at all. Currency is 
for the convenience of the public to furnish a medium of exchange 
to transact the business of the country, in which the national bank, 
or any other bank for that matter, is no more interested than any 
individual in business or trade. 

Fred H. Qtjincy, 
President Planters'' State Bank, Salina, Kans. 



National banks should continue to have a bond-secured currency 
unless there can be substituted for it the currency of a central bank 
or banks based upon a gold reserve; only such gold-sustained cur- 
rency is better than the national- bank currency, the merit of which 
has been proved by nearly 50 years of use. 

A. L. Mills, 
President First National Bank, Portland, Oreg. 



Only so long as may be required to readjust a present situation 
without loss to banks which have bought United States bonds at a 
price 25 per cent higher than their investment value, upon faith in 
their Government, and until the Treasury can fund outstanding 
twos with honor to itself. 

Wm. Ingle, 
Vice President Merchants-Mechanics National Bank, 

Baltimore, Md. 
22 



KEPLIES RECEIVED BY THE COMMITTEE. 23 

Issuing currency is net a necessary banking function; witness the 
fact that national banks alone in the United States enjoy that privi- 
lege, and further, except for limited quantities of uncovered currency 
in the progressive countries of Europe, issues of currency are practi- 
cally confined to single central banks largely as flexible measures. 
The Bank of England is an exception as its note issues are rigid. It 
breaks the back of panics by breaking the law in temporarily issuing 
extra penalized currency that expands to relieve the strain and imme- 
diately is retired to prevent inflation of currency and credit. 

Andrew J. Frame, 
President Waukesha National Bank, Waukesha, Wis. 



As long as there are United States bonds available for the purpose 
they should have a bond-secured currency for a portion of their issue. 
The issue beyond that portion should have an elasticity, which is im- 
possible when secured by bonds. 

Robert D. Kent, 
President Merchants Bank of Passaic, Passaic, A 7 . •/. 



All paper issues could be secured by, say, 25 per cent gold, and the 
balance equally divided bv bonds and A 1 commercial paper; any 
increase in time of emergency to be secured by A 1 commercial paper, 
and first-class farm mortgages not exceeding 40 per cent of the land 
value. 

J. R. Mtjlvane, 
President Bank of Topeka, Topeka, Kans. 



No. 

James K. Lynch, 

Vice President First National Bank of San Francisco. 



In part at least, and any change to another form should be ar- 
ranged to come slowly. 

J. H. Stewart, 

Wichita, Kans. 

They should not. Bond security is a snare and a delusion. 

Eugene Marshall, 

Manchester, Tenn. 



No. National banks should not be allowed to issue or have issued 
to them any currency at all. That is the constitutional privilege of 
Congress. 

Karl F. M. Sandberg, 

Chicago. 



24 REPLIES RECEIVED BY THE COMMITTEE. 

The bond-secured currency should be continued only as long as 
is necessary to close the investment in bonds without loss to the 
banks. The honor of the Government is at stake, as it has in a 
measure induced the banks to take our currency on bonds and it 
should see the banks safely through by enacting Avhatever legislation 
is necessary. 

It has been conclusively proved that a bond-secured currency does 
not respond to the demands of business. This criticism was made 
shortly after 1838 when the plan was adopted by the New York 
Legislature. At that time no other way could be devised to provide 
the banks organized under a general law with currency. The dis- 
turbances of 1837 showed that note holders required the services 
of a trustee to hold the security for the notes and that principle holds 
good at the present time as well as in 1837. Secretary Chase fol- 
lowed the same plan and made the Treasurer of the United States 
the trustee and the security the bonds of the United States when he 
formed our present national banking system. This plan must be 
followed now in any change in our banking laws as an integral part 
of banking under a general law. 

The termination of the present bond-secured currency need not 
be made part of a new banking measure, but should rather be dealt 
Avith in a separate act. All subjects not essential to banking reform 
should be excluded from the proposed bill, so as to make the new 
measure as simple as possible in all its aspects. 

The points established in 1838 — that is, a trustee for the currency 
and approved collateral security — can be attained now by making 
clearing houses the trustees and limiting the security to the classes 
in which national banks are authorized to invest their funds by the 
national-bank act. Further safeguards can be added by following 
the methods long adopted by the New York clearing house. 

Theodore Gilmax, 

New York. 



No. 

R. Greenlees, 

Laivrence, Kans. 



Not absolutely nor for a long period either — a tax levied on the 
issue of currency and kept in the Treasury for safety fund would in 
about a decade create a sufficient safety fund. 

Sigmund Feust, 
President South Bronx Property Owners? Association, 

New York City, N. Y. 



Should national banks continue to have a bond-secured currency? 
No. Keep the bankers, national as well as private, out of the cur- 
rency business. This is the function of the Government, and can 
not safely be delegated to anyone else. 

Carl Pieper, 

Menomonie, Wis. 



KEPLIES RECEIVED BY THE COMMITTEE. 25 

Assuredly not. A currency that is something which is not 
money — a mere credit device intended to serve as a substitute for 
and in lieu of money — is an abomination, a panic-breeding lie, a 
thing that no nation actuated by a reasonable desire for the general 
welfare can contemplate the use of. 

Geo. G. Merrick, 

Nyssa, Or eg. 



QUESTION NO. 5. 

Should the present requirements of reserves for national banks be re- 
duced, increased, or otherwise modified? 

ANSWERS. 

The present requirements of reserves for national banks should be 
reduced to 10 per cent lawful money on hand, 10 per cent with dis- 
trict reserve banks, and 5 per cent with other national banks — ap- 
proved reserve agents. Properly conducted banks will have a still 
further amount in available cash funds. The change from the 
present system of reserve to any that might be adopted should be 
worked to very gradually, in order that there might not be enforced 
liquidation in order to meet new reserve requirements. 

John McHtjgh, 
President First National Bank, Sioux City, Iowa, 



Present reserve is all right. 

S. H. BURNHAM, 

President First National Bank of Lincoln, 

Lincoln, Neor. 



I think the present requirements for reserve for national banks is 
about correct, and no bank should be prohibited by law from using 
reserves maintained to meet an emergency when the emergency 
arises, as the law to-day in many States, as well as under the national 
law, make a bank insolvent when below its legal reserve, or at least 
renders it subject to insolvency. 

Fred B. Qttincy, 
President Planters'' State Bank, Salina, Kans. 



If a central bank or regional reserve banks are established, the 
present reserve requirements of national banks can be slightly re- 
duced, the cash reserve required to be kept in the vaults should be 
smaller. One of the main purposes of the proposed reform is to 
concentrate the cash of the country instead of having it scattered in 
individual bank vaults. 

A. L. Mills, 
President First National Bank, Portland, Oreg. 

26 



EEPLIES BECEIVED BY THE COMMITTEE. 27 

I hardly think we would be justified in decreasing the reserve of 
banks required to be kept by law, but it does occur to me that the 
cash reserve that the banks are required to keep in their vaults is 
an unreasonable amount. For instance, we are required to keep 12^ 
per cent of our total deposits in actual cash in our vaults. There 
never has been a time, and perhaps never will come a time, when 8> 
per cent would not be a sufficient amount. 

D. N. Fink, 
President Commercial National Bank, Muskogee, Okla. 



Much would depend upon the general character and requirements 
of the new law. With proper provision for prompt and automatic 
supply of reserve notes, based upon gold or for credit with central 
or regional reserve bank secured in like manner, a home reserve of> 
say, 7^ per cent of net demand deposits should be ample when sup- 
plemented with a like credit reserve with central or regional bank. 

Wm. Ingle, 
Vice President Merchants-Mechanics National Bank, 

Baltimore, 31 d. 



The reserves of national banks are reasonably ample now, except 
that small portions from each bank should be mobilized into some 
central reservoir, that can be used in any section when trouble may 
threaten, through rediscounting for cash, to the end that cash sus- 
pension by solvent banks may be avoided and confidence generally 
be not shaken. To accomplish such mobililzation, 5 per cent of the 
deposits in the three central reserve cities, 2^ per cent in the other 
reserve cities, and 1 per cent from the country banks' deposits should 
be deposited with a reserve association to mobilize a fund for redis- 
counts in trouble. This costs nothing to any bank nor limits their 
powers, as these deposits should still count as reserves for depositing 
banks. This mobilized reserve should be held for use only at high 
interest rates to prevent trouble. To loan it in normal times is to 
defeat the very object sought, to wit, it empties the reservoir when 
no fire exists. This method will bring flexibility out of present 
unused reserves. To ask for a deposit of 5 per cent of country 
bank deposits and 10 per cent of capital is so extremely burdensome 
it would drive them from the system and wreck it. 

Andrew J. Frame, 
President Waukesha National Bank, Waukesha, Wis. 



Regarding the question as to the advisability of a change on re- 
serve requirements, I would say that in times of normal business 
the per centage of reserve for national banks of central reserve cities, 
reserve cities, and those spoken of as country banks are about correct, 
but are totally inadequate in times of financial pressure, which so- 
often occur under the existing monetary system. 

Robert D. Kent, 
President Merchants Bank of Passaic, Passaic, N. J. 



28 REPLIES EECEIVED BY THE COMMITTEE. 

Reserves should be reduced, under a better system, to a maximum 
of 15 per cent. 

J. R. MlTLVANE, 

President Bank of Topeka, Topeka, Kans. 



Reserve requirements should be modified, the modification con- 
sisting of such centralization of gold coin as will permit the national 
banks to perform their functions with less coin in their vaults. Any 
excess is economic waste. 

James K. Lynch, 
Vice President First National Bank of San Francisco. 



Left as it is. The amount is reasonable, and experience has shown 
it to be none too much with our present currency system. With an 
elastic currency it might safely be slightly reduced. 

J. H. Stewart, 

Wichita, Kans. 

The requirements should be changed radically and the reserve 
made secure beyond question in such a manner as to forever prevent 
reserve agents from refusing to pay reserves in actual money. 

Eugene Marshall, 

Manchester, Tenn. 

The reserves should be increased. 

Karl F. M. Sandberg, 

Chicago. 

The provisions of the national-bank act in regard to reserves of 
lawful money are wise, and have been found to work well, and are 
the result of long experience. 

The whole mystery of banking lies in the preservation of adequate 
cash reserves. They are the foundations of the credit system. The 
safety of our monetary affairs depends on the maintenance of ample 
reserves. On this question the Government must stand firm in re- 
sisting the pressure from the banks to diminish the reserves. 

Every monetary panic since the formation of the Bank of England 
in 1689 has been caused by depleted reserves. 

The history of banking for over two centuries shows a constant 
struggle on the part of banks to work their facilities up to the ex- 
tremest point allowed by law, often the danger point, so as to make 
their business as profitable to themselves as possible, and on the part 
of the Government a counter struggle to restrict their operations 
within safe bounds. 

Not to go back to a remote period, it is only necessary to refer 
to the trust company panic of 1907, caused, in large measure, by 
the inadequate reserves against demand deposits, carried by New 
York trust companies. The law governing reserves can not be vio- 
lated with impunity. It is not so much a banking law as it is a law 



KEPLIES RECEIVED BY THE COMMITTEE. 29 

of probabilities and chances. The law works with increasing accu- 
racy in proportion to the number of small accounts; but bank bal- 
ances are made up of large and small. One hundred per cent of 
average-sized obligations can not be successfully protected through 
thick and thin by 5 per cent or 15 per cent of cash reserves. Bagehot 
called 17 per cent of cash against 100 per cent of obligations the 
" apprehension minimum." 

A sober judgment can not but look with apprehension at the 
present condition of the New York clearing-house banks, who within 
two years have reduced their 25 per cent reserves established by the 
national-bank act, by admitting trust companies with only 15 per 
cent reserves. 

It would be a proper subject for investigation to ascertain by in- 
quiry how much the reserves of the New York clearing-house banks 
have been reduced below the 25 per cent limit by the admission of the 
trust companies with 15 per cent reserves. It may be the New York 
banks are preparing for another collapse, when they will be forced 
for their own protection to shut down on the rest of the country as 
they have done before. The 10 per cent reserve deposited with other 
banks by the trust companies is a banking fallacy, for it is not a re- 
serve of lawful money. Ex-Chancellor of the Exchequer, George J. 
Goscben, said, in his memorable speech after the Baring failure, 
that— 

cash on call is no reserve in the general sense, so far as the community is 
concerned, because it means when you call in your money on call that you are 
unbalancing another person while you may be relieving yourself. 

The New York banks have nullified the requirement as to reserves 
contained in the national-bank act, and the national banks in that 
clearing house are parties to the proceeding. The largest clearing 
house in the country has thus deliberately diminished its ability to 
protect the business of the Nation, and has frustrated the intention of 
Congress to make New York a 25 per cent reserve center. The " dou- 
ceur," which appears to have influenced this action, was the 10 per 
cent of deposits with the other clearing-house banks. In Chicago, 
St. Louis, and other cities the same process has gone on, and the 
weakness thereby brought into our banking situation is not known 
to the public and will not be until there is a rude awakening. 

It is difficult for an outsider to calculate the present reserve of law- 
ful money carried by the banks of New York, but it has been esti- 
mated to be about 17 per cent of their demand liabilities, which all 
experience shows is very near, if not over, the danger line. 

Congress is the only power to protect the business interests of the 
country from the danger of monetary disturbances caused by the 
errors of the banks. The decision in the Minnesota rate cases, 
rendered by the Supreme Court of the United States June 9, 1913, 
is applicable here. Justice Hughes said: 

The State may provide local improvements, create and regulate local facili- 
ties, and adopt protective measures of a reasonable character in the interest of 
the health, safety, morals, and welfare of its people. * * * Where matters 
falling within the State powers, as above described, are also * * * within 
the reach of the Federal power, Congress must be the judge of the necessity of 
Federal action. * * * The paramount authority of Congress enables it to 
intervene at its discretion for the complete and effective government of that 
which has been committed to its care, and for this purpose, and to this extent, 



30 KEPLIES RECEIVED BY THE COMMITTEE. 

in response to a conviction of national need, to displace local laws by substitut- 
ing laws of its own. 

No more conspicuous instance of the necessity of Federal interven- 
tion and control exists than is furnished by the lax laws of the States 
in reference to the maintenance of adequate reserves of lawful money. 
The monetary stability of the country depends on conservative action 
by Congress to control bank reserves. 

As at present organized clearing houses can go on depleting bank 
reserves below the clanger point. The threatening increase of State 
banks carrying small reserves in Chicago should give Congress cause 
for reflection, where there are 12 national banks as against 65 State 
institutions of all sorts. It would require an examination by an ex- 
pert to ascertain the percentage of lawful money against deposits 
held by the trust companies of New York City. A rough calculation, 
based on the figures for March 7, 1913, given by the Commercial and 
Financial Chronicle, on page 20 of their bank and quotation section 
for June, 1913, indicates that the lawful money reserve on that day 
Avas $13.80 to protect each $100 of deposits. 

As practically all the banks of the country are connected with 
clearing houses Congress can take a decided step in the direction of 
controlling bank reserves by requiring all clearing houses to be in- 
corporated under a Federal law, wmcse members shall be required to 
maintain the same reserves as are fixed in the national-bank act for 
the various classes of banks. There is no class of institutions v 7 hich 
can bear this burden more easily than trust companies. In New 
York the average value of their $100 shares is over $450. The ten- 
dency of banking practice has been to rely more and more on the 
25 per cent reserves of national banks. The condition of banking 
has become top-heavy, and conservative action by Congress in refer- 
ence to reserves is the banking legislation most urgently needed at 
the present time. 

The law of reserves is not partial in its application. Insufficient 
reserves should not prevail in any part of the country. All institu- 
tions holding demand deposits should be classified as they are in the 
national-bank act and the law of reserves should apply equally to all. 
Like the law against the overcrowding of steamboats, there should be 
no exceptions wherever a steamboat floats. On the 19th of March, 
1912, Gov. Dix signed a bill reducing the amount of lawful money 
reserve to be held by New York State banks in small localities 
from 50 per cent of 10 per cent to 30 per cent of 10 per cent. The 
law 7 of New York governing trust company reserves allows trust 
companies to count in their reserves national-bank notes on a par 
with gold and silver. This is a measure of inflation and is con- 
trary to the national-bank act, Avhich excludes them from reserves. 

Reference is made to discussion of reserves in my two books — A 
Graded Banking System and Federal Clearing Houses — as follows : 
In A Graded Banking System, see pages 10. 17, 26, 34, 38, 39, 40, 41, 
43, 45, 46, 50, 51, 52, 53. 54, 55, 56, 58, 154; Federal Clearing Flouses, 
see pages 9, 12, 53, 63, 67, 73, 75, 108, 110, 114, 118, 132, 135, 136. 137, 
141, 147, 145, 165, 190, 186, 208, 276, 279. 

Copies of these books accompany these answers. 

The penalty at present imposed by the national-bank act for im- 
paired reserves is too severe, and produces alarm among bank direc- 



REPLIES RECEIVED BY THE COMMITTEE. 31 

tors and leads to precipitate action when money is active, in calling 
loans and refusing rediscounts. This provision should be mollified. 
The law now says that banks shall not make new loans or pay divi- 
dends until the reserve is restored, and on 30 days' notice the comp- 
troller may appoint a receiver to wind up the bank. This penalty is 
so harsh that it is a dead letter. A more effective, because milder, 
penalty would be to impose a tax on deficiencies. I made an argu- 
ment to this effect before the New York Assembly committee on banks 
March 1, 1904. The provision might read to the following effect : 

If the lawful money reserve of any bank, State or national, shall be less than 
the amount required by sections 94 to 105, inclusive, of chapter 5. of the na- 
tional-bank act, as amended, or in any other part thereof, such bank shall be 
liable to pay, and shall pay, into the treasury of the clearing-house association 
of which it is a member, to be applied to its current expenses, a tax in amount 
equal to 6 per cent per annum on the aggregate amount of such deficiency or 
deficiencies in the reserve below the legal requirement for such bank or trust 
company, and said tax shall be paid annually on or before the 1st day of 
February in each year for the deficiency or deficiencies during the year ending 
the preceding 31st day of December. 

It has been noticed that some banks have the habit of infringing on 
their reserves, relying on the fact that the conservative banks carry 
a surplus above the legal limit. Goschen discusses this subject in his 
speech before referred to, and says : 

You have this remarkable fact, that the soundest and strongest banks may 
be making the smallest dividends, whilst the more imprudent banks who invest 
their depositors' money, leaving a small reserve, are able to show much larger 
dividends to their shareholders. 

It is to correct this condition that the above method of taxing defi- 
ciencies is proposed. 

Mr. Goschen's speech will be found on pages 121 to 148 of my book, 
Federal Clearing Houses. 

Theodoee Gilman, 

New York. 



Present requirements of reserves for national banks should be 
reduced or left to the good judgment of the men in charge of the 
bank. You can not do this, however, until you provide a head to 
the banks of the country, giving it power and authority to care for 
the individual units, as need arises. In September, 1911, the com- 
bined banks of this country held in cash $1,545,000,000. Of this 
amount $1,428,000,000 was tied up by law as legal reserves, this being 
nearly one-half of the money in the United States, and under this 
head please note our bank deposits are increasing very rapidly from 
year to year. If we have an increase of $1,000,000,000 in bank de- 
posits we must, under our present laws, increase the amount which 
is tied up as legal reserve in a corresponding manner — that is, 
increase the percentage of the money of the country which is locked 
up and not available in any sense for the use of the business of the 
country. 

J. R. Greenlees, 



3056—13- 



Laicrence, Kans. 



32 EEPLIES EECEIVED BY THE COMMITTEE. 

Will ask for the report of the Comptroller of Currency and com- 
pare it with other countries' statistics and answer then. 

Sigmund Feust, 
President South Bronx Property Owners^ Association^ 

New York City, N. Y. 



Reserves are an invention of the bank to retire money from use. 
Money out of use, in actual daily circulation, no longer performs the 
debt-paying function for which money was created, thereby causing 
a demand for bank- credit currency for which the bank fails not to 
collect its toll of interest in advance. 

Geo. G. Merrick, 

Nyssa, Oreg. 



QUESTION NO. 6. 

Should an elastic currency be authorized by law? If so, should it be 
limited, and to what amount? 

ANSWERS. 

Yes; banks should be permitted to issue their own currency in 
amount, say, equal to 25 per cent of their capital, such to be protected 
by reserve the same as required for deposits. The currency thus is- 
sued will be a first lien on the assets of the issuing bank and be 
subject to an interest charge graduated so that it would come out 
in proper volume when needed and retire when not. In case of 
great need, or unusual stress, it should be possible for banks to go 
to a district reserve bank, or some such agency, with good commer- 
cial paper, receive credit or currency, or both, to the amount of 
75 per cent of the face of such paper when approved by the govern- 
ing board of the district reserve bank, or such competent authority 
as may be determined upon. The currency in such case to be that 
of the district reserve bank. It should be arranged so that it could 
go current in any of the several districts of the country and should 
be redeemable at any reserve bank. 

John McHttgh, 
President First National Bank, Sioux City, Iowa. 



An elastic currency should be authorized by law. As to the 
amount, I am not prepared to say. 

S. H. Buenham, 
President First National Bank of Lincoln. 



I think a more elastic currenc}^ should be authorized by law. It 
should undoubtedly be limited in some way, but I do not feel capa- 
ble of indicating just how or to what extent. 

Fred H. Qtjincy, 

President Planters'' State Bank, Salina, Kans. 



An elastic currency should be authorized by law and the amount 
to be issued should be limited to a percentage of the paid-up bank- 
ing capital of the country, say 50 per cent. 

A. L. Miles, 
President First National Bank y Portland, dreg. 

33 



34 EEPLIES KECEIVED BY THE COMMITTEE. 

An elastic currency should be one of the chief ends to be attained 
in a new law. No limit in dollars should be fixed. Should a reason- 
able limit be named, trouble would quickly follow the knowledge that 
such limit was being approached. An unreasonable limit would in- 
vite inflation except in the presence of a tax which would make use- 
less the law as a practical proposition. It would probably be wiser 
in setting no limit to adopt a slicling-scale tax, its maximum to fol- 
low its minimum not too quickly, but at the approach of its maxi- 
mum to be so severe as to compel liquidation. 

Wm. Ingle, 
Vice President Merchants-Mechanics National Bank, 

Baltimore, Md. 



A secondary uniform elastic currency should be authorized. To 
issue it without a tax on it would be like our present national-bank 
notes. They expand, but do not contract. Quick redemption of a 
currency not subject to distrust, or a heavy tax to drive it home, also 
expands for the profit in such issues and does not contract. A cur- 
rency not subject to a heavy tax to make the issues unprofitable is 
not elastic. An upgrade tax will automatically limit issues. 

Andrew J. Frame, 
President Waukesha National Bank, Waukesha, Wis. 



Most certainly such a currency should be authorized. I do not 
think it should be limited in amount by law, but its issue on large 
amounts and for lengthy periods should be provided against by 
increasing the rate of charge or tax with the increasing amount and 
with the length of time outstanding. 

Robert D. Kent, 
President Merchants'* Bank of Passaic, Passaic, N. J. 



Yes; to be issued to the Eegional Association in amount equal to 
its capital and surplus; and in times of emergency additional cur- 
rency to be issued on good commercial paper, limited in amount to 
80 per cent of the face of the security, and bearing interest at 3 per 
cent per annum for three months, and 1 per cent per month additional 
thereafter until redeemed. 

J. R. MULVANE, 

President Bank of Topeka, Topeka, Kans. 



(1) Yes. 

(2) It should not be limited by law. The limit must depend upon 
(a) the commercial requirements of the country; (h) the gold 
reserves. 

(3) The limit from time to time must be left to the trained and 
experienced men who should have control of this most important 
question. 

James K. Lynch, 
Vice President First National Bank of San Francisco. 



EEPLIES RECEIVED BY THE COMMITTEE. 35 

Yes; an elastic currency should be authorized by law, and should 
be limited first, by the judgment of the managers; and second, to 
not over double the capital and surplus of the banks in the associa- 
tion. To prevent its misuse the issue should be made expensive. 

J. H. Stewart, 

Wichita, Kans. 

An elastic currency should be authorized under a law which would 
discourage the inflationist and enable the conservative banker to 
obstruct at least any progress in the direction of inflation. 

No specific limit should be set to the amount of currency to be 
issued, as it is believed that the method of issue and redemption 
hereafter described would automatically regulate the amount to 
the demands of business. 

Eugene Marshall, 

Manchester, Tenn. 



An elastic currency — the very best, in fact the only kind — is au- 
thorized by our Constitution now ; and it is unlimited. 

Congress has power to issue currency; also power to institute 
public works to be paid for with such currency. 

Karl F. M. Sandberg, 

Chicago. 

An elastic credit currency is an indispensable adjunct to the credit 
system. 

At no time should the total amount of such notes issued to any 
bank member of a clearing house of issue exceed the amount at such 
time actually paid in of the capital stock of the bank member so 
applying. 

I have advocated the incorporation of clearing houses under a 
Federal law since September, 1893, for the purpose of issuing a clear- 
ing-house currency. 

My reasons for not favoring regional reserve banks will be stated 
in subsequent answers. 

I append a copy of my bill as introduced by the late Senator 
Thomas C. Piatt December 4, 1907, in the first session of the Sixtieth 
Congress. 

Theodore Gilman, 

New York. 



Most assuredly an elastic currency should be authorized by law. 
but it should be a sound currency as well. 

J. K. Greenlees, 

Lawrence, Kans. 



Yes; yes and the amount for the first six months might be fixed 
between three hundred and five hundred millions. And the fore- 
going figures might be extravagant, but no amount can be stated for 
the reason that under present laws fictitious values can be temporarily 
created by stock exchanges, etc. 



36 REPLIES RECEIVED BY THE COMMITTEE. 

Under President Roosevelt, Secretary Cortelyou proposed to issue 
two hundred or three hundred million in Treasury notes and one 
hundred millions Panama Canal bonds, and only the advertising of 
this step was necessary to end the panic. 

The law of supply and demand ruling every community on earth 
is set at naught in the currency question by the manipulation of 
fictitious prices on exchanges. As it is at present it is apparent that 
the banking element in economical questions is more powerful than 
the Government. 

Sigmund Feust, 
President South Bronx Property Owners^ Association, 

New York City, N. Y. 



Yes, certainly; an elastic currency should be authorized. All cur- 
rency should be issued by the National Government, first to the 
States; second, to the counties; third, to the townships; fourth, to 
the cities — all units of our established government who have the 
power to levy taxes. This should be done under safe restrictions, 
up to a certain percentage of their assessed valuation, for public im- 
provements. For example, the National Government should issue 
to the State of Wisconsin upon its bonds a sufficient amount of cur- 
rency to, first, harness its enormous water power contained in its 
rivers; second, for the purpose of reforesting its lands — such as are 
not fit for cultivation; third, for the building of State highways 
and other improvements which add to the value of its wealth. 

Money should also be issued to counties upon county bonds for 
the purpose of public improvements, such as building courthouses, 
jails, insane asylums, good roads, etc. 

To cities upon their bonds for the building of electric light and 
water systems, of public schools, and other public improvements. 

All this can easily be done under safe restrictions, and such priv- 
ilege of having currency issued should be based upon a guaranty 
that every city, county, or State shall guarantee to the National Gov- 
ernment that it will keep all its citizens who are willing to work em- 
ployed at useful labor at all times. The National Government may 
also issue its own currency for the purpose of improving and mak- 
ing navigable its streams, building railroads or other useful im- 
provements, mining gold, silver, etc. How would a panic look if 
you fellows in Congress would dare to legislate in the interest of 
the wealth producer instead of the idle wealth consumer in the way 
above indicated? 

Carl Pieper, 

Menomonie, Wis. 



The " elastic-currency " idea is based upon a false assumption — the 
erroneous assumption that the volume of currency required is one 
that will respond only to the demand for currency as a medium of 
exchange. Those who entertain this idea are seemingly unconscious 
of the fact that the first and probably the most important use to 
which currency is put is to conserve the earnings of the individual 
in an available and nonperishable form, and that it is ever perform- 
ing this office while performing its minor functions. With this truth 



BEPLIES EECEIVED BY THE COMMITTEE. 37 

in mind, it is not difficult to perceive that there will be a legitimate 
use for all representative money that will be called into existence by 
an automatic and scientific system of currency issue. 

James D. Holden, 

Denver, Colo. 



An elastic currency — whatever may be meant by the term — is a 
banker's dream, and under the specious plea of benefit to business 
the only business to be benefited would be the stock gamblers and 
loan sharks. 

Geo. G. Merrick, 

Nyssa, Oreg. 



QUESTION NO. 7. 

Should such currency be the notes of the individual banks or of a 
central reserve association or of a number of regional reserve associations 
or of the United States Treasury ? 

ANSWERS. 

Banks should be permitted to issue their own currency in amount, 
say, equal to 25 per cent of their capital, such to be protected by 
reserve, the same as required for deposits. The currency thus issued 
will be a first lien on the assets of the issuing bank and be subject to 
an interest charge graduated so that it would come out in proper 
volume when needed and retire when not. In case of great need 
or unusual stress it should be possible for banks to go to a district 
reserve bank or some such agency with good commercial paper, 
receive credit or currency, or both, to the amount of 75 per cent 
of the face of such paper when approved by the governing board of 
the district reserve bank or such competent authority as may be 
determined upon, the currency in such case to be that of the district 
reserve bank. It should be arranged so that it could go current in 
any of the several districts of the country and should be redeemable 
at any reserve bank. 

John McHtjgh, 
President First National Bank, Sioux City, loam. 



Such elastic currency should be issued by a central reserve asso- 
ciation. 

S. H. BURNHAM, 

President First National Bank of Lincoln, Lincoln, Nebr. 



I think the currency should be notes issued by a central associa- 
tion or associations with ample capital and surplus to make them 
absolutely good beyond the question of a doubt and to such an extent 
that the United States Government could in some way stand behind 
the currency. I do not believe that any currency will circulate freely 
in the United States that the United States is not obligated in some 
way to its ultimate redemption, and it would be better to have no 
currency than to have a currency of doubtful value. 

Feed H. Quincy, 
President Planters^ State Bank, Salina, Fans. 

38 



KEPLIES RECEIVED BY THE COMMITTEE. 39 

Such currency preferably should be the notes of a central reserve 
association; next, of a number of regional reserve associations; next, 
notes of individual banks. In no event should they be notes of the 
United States Treasury. The Government should not be in the 
banking business, as the finances of the country should not be im- 
periled by party politics. 

A. L. Mills, 
President First National Bank, Portland, Oreg. 



Currency should be issued only upon the initiative of a bank 
needing it and upon its requisition for notes made upon a central 
reserve association or regional banks accomplishing the same pur- 
pose. Currency should not be issued by the Treasury nor should 
the Government have any control over the issuance, excepting only 
to see that the law was observed. 

The name of the issuing bank need not be in evidence on its note, 
as it would be wise to have such notes uniform in general appearance, 
but all bearing some mark or symbol identifying them with the 
issuing bank. 

Wm. Ingle, 
Vice President Merchants-Mechanics National Bank, 

Baltimore, Md. 

Individual bank issues should be gradually retired, as too rapid 
retirement always disturbs economic equilibrium. Prefer, first, a 
central reserve association — say in New York City, Chicago, and 
San Francisco; second, if the mobilized reserves were deposited in 
the clearing houses of these three cities, relief could be had in all 
sections when trouble threatens. As clearing-house memberships 
are nonpolitical, they would be governed solely in the interest of 
business; third, utilize United States subtreasuries in these cities. 
Through our present central reserve banks either of these suggestions 
would serve amply all sections. 

Andrew J. Frame, 
President Waukesha National Bank, Waukesha, Wis. 



A portion of the total needed currency should be issued by the 
individual banks. This amount should be secured by a deposit of 
bonds or other acceptable securities. This portion need not be 
elastic, but beyond such portion additional circulation possessing 
elasticity should be issued to the bank, preferably by a central re- 
serve association or a bank of the United States. Issue by regional 
reserve associations or the United States Treasury would, how- 
ever, be a great advance upon our present plan. 

Robert D. Kent, 
President Merchants Bank of Passaic, Passaic, N. J. 



It should be notes of a central reserve association. 

J. R. MULVANE, 

President Bank of Topeka, Topeka, Kans. 



40 KEPLIES RECEIVED BY THE COMMITTEE. 

(1) It is not advisable to allow individual banks to issue cur- 
rency. 

(2) It can best be done through a central reserve association. If 
deemed advisable it may be accomplished by means of regional asso- 
ciations, provided there is a strong central governing board, compe- 
tent through experience, to handle the matter. 

(3) Currency should not be issued by the United States Treasury, 
for the reason that there is no corresponding asset in the Treasury 
to the liability so created, and when issued Treasury notes are un- 
secured promises to pay and a constant expense to the Government 
and a source of danger whenever a general financial disturbance is 
imminent. 

James K. Lynch, 
Vice President First National Bank of San Francisco. 



I think I am in favor of a number of regional reserve associations 
for the issuing of the currency. 

J. H. Stewart, 

Wichita, Kans. 



National currency should be issued only by the National Treasury 
and should be guaranteed by the credit of the Nation. 

It should be issued only in exchange for 2 per cent Government 
bonds or a monetary equivalent for the same. 

All bonds received in exchange for currency should be canceled. 

Interest accrued on bonds canceled should be paid to the party 
surrendering the same. 

The national currency should be given adequate legal-tender quali- 
ties, and all notes now in circulation except coin certificates should 
be retired. 

Eugene Marshall, 

Manchester, Tenn. 



Currency should be issued by the United States Treasury only, 
and solely for the use of the Government, not by or for any banks, 
associations, or others. 

Karl F. M. Sandberg, 

Chicago. 



The banking laws of the United States are free to all who desire 
to engage in the business of banking. Under this permission or 
privilege tens of thousands of banks have been organized, each one 
like every other. The issue of currency is a sovereign power and can 
not with safety to the public be delegated to banks generally, espe- 
cially to thousands of such, large and small, except under the most 
careful safeguards. Out of the panic of 1837 and previous expe- 
riences arose the dictum that the only safe way for the issue of cur- 
rency by many banks organized under a general law was that se- 
curity should be lodged with a trustees by each issuing bank to guar- 



REPLIES RECEIVED BY THE COMMITTEE. 41 

antee the payment of its notes. Under that rule a bank with a small 
capital can issue money of equal credit with that of banks having 
millions of capital. This rule destroys monopoly in banking and 
places all banks, large and small, on an equality. Consequently 
under this system currency can not be issued by individual banks, 
however large their capital may be. It might be said that this is 
an injustice to large banks and deprives them of the advantage and 
benefit of their large capital. But the country has debated this ques- 
tion and has decided beyond appeal that all banks, large and small, 
must have the same rights and privileges. 

If anyone advocates the issue of currency by the United States 
Treasury he should work his plan out so that it may be understood. 
On the face of it, it would open the door to untold scandals if that 
course were pursued. It is needless to cumber the discussion with 
arguments against a half-baked theory. 

The question of a United States bank, or of a central reserve asso- 
ciation, has also been debated in this country, and the people have 
decided against the central-bank idea in any form. The political 
parties in the recent campaign have echoed the same decision, and 
there is no use in trying to open the case again. 

Consequently currency can not be issued by a United States bank 
or by individual banks, or by a central reserve association. 

The proposition that the currency be issued by a number of re- 
gional reserve associations is directly mentioned or hinted at in over 
20 of the 32 questions submitted for answer, and consequently should 
be carefully considered and compared with other measures, both past 
and present, with the same object. 

The regional reserve bank plan is evidently a successor to the 
First and Second United States Banks, and partakes of the charac- 
teristics of the central reserve association recommended by the Na- 
tional Monetary Commission in their report to Congress in January, 
1912. Like these plans, it is doomed to the jakes when its provisions 
are fully understood by the public. 

The description of the proposed regional reserve banks as contained 
in the New York papers of June 16. 1913, may be accepted as approx- 
imately accurate. 

In a broad way, the regional reserve bank proposes to combine 
three functions : First, the holding of the reserves on general deposits 
of its members; second, the issue of currency to its members; and 
third, the transaction of a more or less general banking business. 

The inquiry as to its first object is whether this new method of 
holding reserves is as safe as the present. Reserves are now held by 
many banks in the reserve cities. It is proposed to call them in and 
place them in one bank. If this one regional bank got into trouble, 
the reserves of a whole district would be locked up. The reserves of 
a whole district are never now all in one bank. There is therefore a 
danger in the new plan which does not exist in the old. It should be 
considered whether the country is ready to enter on an untried 
scheme. Are not the interests of the country too vitally important to 
be risked on an uncertainty? 

Then, from the nature of the case, the two functions of holding 
reserves and issuing currency are so different that they can not be 
successfully united. Reserves on deposit should be held in a com- 



42 REPLIES RECEIVED BY THE COMMITTEE. 

paratively small number of cities and distributed among a number 
of banks in each city. The cities designated should be those where 
business is so diversified that the reserves can be used temporarily 
and can be called in without occasioning disturbance. 

On the other hand, the issue and distribution of currency should 
be made from many points, so that as large a territory as possible may 
receive the benefits of the issues. The currency would be safer and 
more beneficent if issued from 55 cities than from 20, because the 
smaller the territory the more intimate the knowledge of credits and 
responsibilities on the part of the bank making the loans. The hold- 
ing of reserves, on the contrary, would be safer if deposited in 20 
cities than in 55 and divided up among many banks in the 20 cities. 
(See p. 259 of Federal Clearing Houses.) 

So no doubt the prevalent idea in the country will be in favor of 
separating the two functions because they can be better attended to 
apart. The present method of holding reserves should be continued 
unchanged and the arrangements for the issue of currency be taken 
up as a separate matter. 

Theodore Gilman, 

New York. 



If our banks are welded into a real system and the power given 
to this central organization above suggested, that organization should 
be the sole bank of issue in the United States. The right to issue 
currency should not be given to any regional reserve association, 
because the currency of the country is a thing that can not be par- 
celed out to different localities without weakening the strength of 
the entire country; neither should this currency be issued by the 
United States Treasury, because while the note of the Government 
issued by the Treasury is absolutely good, the United States Treasury 
is not, never has been, and probably never can be a bank or have the 
powers of a bank. Witness the time under President Cleveland 
when we were forced to sell $200,000,000 of bonds to replenish the 
gold reserve, because the Treasury of the United States is a place of 
final redemption and is not a bank, nor can it exercise the powers 
of a bank. 

J. R. Greenlees, 

Lawrence, Kans. 



Part 1. Yes. 

Part 2. No. 

Part 3. No. 

Printed and regulated, etc., b}^ the Government. 

Part 4. In case of war, etc., and also in case of extraordinary 

r ents, yes. 

SlGMTJND FEUST, 

President South Bronx Property Oivners'' Association, 

New York City, N. Y. 



KEPLIES EECEIVED BY THE COMMITTEE. 43 

Nothing but United States Treasury notes, backed by all the wealth 
of the Nation, including gold, silver, copper, iron, meat, cotton, corn, 
tobacco, whisky, beer, and everything else which is taxable. The 
items of whisky and beer may look foolish, but you all know that they 
are good revenue producers. 

Carl Pieper, 

Menomonie, Wis. 



Neither " notes " nor " bills of credit " or other form of credit cur- 
rency should be emitted by the Government. All future issues should 
be absolute paper money — a full legal tender — issued as representa- 
tive currency against the imperishable wealth of the individual 
offering it for monetization. Such a currency system will protect 
the collectivity, provide a sufficient supply, and prevent an overissue. 
All issues should be direct from the Government to the money user. 
Every issue should be against the imperishable wealth of the ap- 
plicant, upon which the Government should take a primary lien 
to secure payment of the nominal annual tax required to make the 
system self-sustaining. 

James D. Holden, 

Denver, Colo. 



QUESTION NO. 8. 

Should these notes be procured from the Treasury on pledge of security 
and if so, of what should this security consist ? Should these notes be a 
first lien of the Government upon the assets of the association or bank 
to which they are issued? 

ANSWERS. 

Banks should be permitted to issue their own currency in amount, 
say, equal to 25 per cent of their capital, such to be protected by 
reserve the same as required for deposits. The currency thus issued 
will be a first lien on the assets of the issuing bank and be subject 
to an interest charge graduated so that it would come out in proper 
volume when needed and retire when not. In case of great need or 
unusual stress it should be possible for banks to go to a district- 
reserve bank or some such agency with good commercial paper, 
receive credit or currency, or both, to the amount of 75 per cent of 
the face of such paper when approved by the governing board of 
the district-reserve bank, or such competent authority as may be 
determined upon; the currency in such case to be that of the dis- 
trict-reserve bank. It should be arranged so that it could go current 
in any of the several districts of the country, and should be redeem- 
able at any reserve bank. 

John McHugh, 
President First National Bank, Sioux City, Iowa. 



These notes should be procured from the central organization 
secured by bonds or commercial paper, and should be a first lien upon 
the assets of the association or bank to which they are issued. 

S. H. BURNHAM, 

President First National Bank of Lincoln, Lincoln, Nebr. 



I think these notes should be issued by the association or associa- 
tions upon the approval by the Government and should be a first lien 
upon all the assets of the association issuing the same, but not of the 
individual banks whose assets should at all times be for the protec- 
tion of all the creditors of the bank equally. 

Fred H. Quincy, 
President Planters' State Bank, Salina, Kans. 
44 



KEPLIES RECEIVED BY THE COMMITTEE. 45 

If these notes are issued bya central-reserve association or regional- 
reserve associations there should be maintained against them a gold 
reserve of at least 25 per cent. If the notes are to be issued by 
national banks, as at present, there should be a wider latitude given 
in the kinds of collateral security pledged; in other words, besides 
Government bonds there should be permitted a pledge of bills re- 
ceivable. If bills receivable are pledged the notes should also be a 
first lien upon the assets of the bank. 

A. L. Mills, 
President First National Bank, Portland, Oreg. 



It would be most unwise to associate the Treasury in any manner 
with the issuance of currency, excepting as printer and registrar to 
secure safety and uniformity and as supervisor to see that the law 
is properly followed. 

The notes could properly be a first lien upon the assets of the 
issuing bank. 

Wm. Ingh, 
Vice President Merchants-Mechanics National Bank, 

Baltimore, Mel. 



They should be so amply secured, barring stocks of all kinds, that 
no first lien is necessary. 

Andrew J. Frame, 
President Waukesha National Bank, Waukesha. Wis. 



If the elastic currency should be procured from the Treasury it 
should be received on a pledge of security. This security should con- 
sist largely of two-name commercial paper. It might also include 
State, county, and municipal bonds of certain prescribed standards 
and possibly of a certain portion of high-grade railroad bonds. If 
the latter are included, it should be on some plan that would riot 
create an artificial market for such securities. All notes so procured 
from the Treasury to be guaranteed by regional associations of banks 
with an aggregate capital of not less than $5,000,000. With security 
and the guaranty specified it will not be necessary to make the notes 
a first lien upon the assets of the bank. I would, however, advocate 
the setting aside of a portion of the tax or charge on the notes to 
establish a guaranty fund. This fund to be gradually increased 
until it reached a substantial sum equal to 5 or 7^ per cent of the 
estimated maximum amount of such currency likely to be outstand- 
ing at one time. 

Robert D. Kent, 
President Merchants' 1 Bank of Passaic, Passaic, N. J. 



If these notes should be procured from the United States Treasury, 
the security should consist of gold, marketable bonds, at 90 cents, and 



46 EEPLIES RECEIVED BY THE COMMITTEE. 

commercial paper, at 85 cents, and they should be a first lien on the 
regional association and on the bank to which they are issued. 

J. R. MULVANE, 

President Bank of Topeka, Topeka, Kans. 



(1) Circulating notes might well be provided as now by the 
Comptroller of the Currency, should this office be maintained. They 
should not be issued against a direct pledge of collateral, but against 
the general assets of the reserve association, under whatever form it 
may be organized. 

(2) They should be a first lien to the holder on the assets of the 
association. 

James K. Lynch, 
Vice President First National Bank of San Francisco. 



From the Treasury on pledge of high-grade bonds and commercial 
paper, and as the notes would be money the Government should have 
the prior lien. 

J. H. Stewart, 

Wichita, Kans. 



The first part of this question appears to be fully answered by the 
answer to question 7. 

Currency should be redeemed by the United States Treasury at 
the option of the holder by the issue of bonds bearing interest at 2 
per cent from date of issue. 

This would make the currency and the 2 per cent bond inter- 
changeable at all times. 

It would relieve the Treasury of the payment of interest on all that 
part of the national debt represented by outstanding currency. 

It would furnish the common people with an interest-bearing 
security always available in currency. 

This last is something which no banking law has yet accomplished. 

Eugene Marshall, 

Manchester, Tenn. 



No. No notes should be u procured " on " pledge of security." No 
currency should be issued or paid out for anything but work or sup- 
plies for the Government. 

Karl F. M. Sandberg, 

Chicago. 



The Government should supervise banking as it supervises all 
other trades, railroading, importing, mining, manufacturing, etc. 
Banking should be considered a trade, and no exception should be 
made in the character of the laws controlling it. The Government 
should be over the banking business not in it. It is not the province 
of the Government to engage in the banking business. 



EEPLIES RECEIVED BY THE COMMITTEE. 47 

The Government can properly deal with clearing houses to the 
extent of printing notes for them, responding to requisitions for 
notes to be issued as currency, fixing the character of the security 
clearing houses may accept as collateral for them, just as it fixes 
the character of the securities in which national banks may invest 
their deposits, and supervising the business done by clearing houses 
to see that the restrictions of the law have been complied with, but 
the Government should not enter into the details of the banking 
business any more than it now enters into the business of national 
banks. The methods now in existence, established by law, should be 
carried on and up into the supervision which the Government should 
make over the institutions of the next higher grade above the 
national banks. There is no call for any change in the theory 
adopted when the national system was framed. 

The securities for currency should consist of the securities which 
the national bank act provides for the investment of the funds of 
national banks. What else can the banks have to pledge with clear- 
ing houses as a basis for currency loans? 

The Government should not have a first lien on the assets of 
banks for their currency loans. Those loans should be protected 
by the assets pledged and any shortage should be made up by the 
banks associated in the clearing house making the loans. This is 
the method followed by the banks associated in clearing houses and 
is ample protection to the public. 

Theodore Gilman, 

New York. 



These notes should not be procured from the Treasury on the 
pledge of security, but should be issued by the central organization 
against its holdings of coin, and possibly in case of emergency against 
its holdings of commercial paper discounted for the banks of the 
United States. 

J. R. Greenlees, 

Lawrence ) Kans. 



Yes ; as to Treasury. 
No; as to association. 
Yes ; as to banks. 

SlGMUND FEUST, 

President South Bronx Property Owners'* Association, 

New York City, N. Y. 

3056—13 4 



QUESTION NO. 9. 

Should all currency be based upon gold ? If so, how should it be issued, 
and what per cent of gold reserves should be required ? 

ANSWERS. 

Banks should be permitted to issue their own currency in amount, 
say, equal to 25 per <;ent of their capital, such to be protected by 
reserve the same as required for deposits. The currency thus issued 
will be a first lien on the assets of the issuing bank and be subject to 
an interest charge graduated so that it would come out in proper 
volume when needed and retire when not. In case of great need or 
unusual stress it should be possible for banks to go to a district 
reserve bank or some such agency with good commercial paper, re- 
ceive credit or currency, or both, to the amount of 75 per cent of the 
face of such paper when approved by the governing board of the 
district reserve bank or such competent authority as may be deter- 
mined upon. The currency in such case to be that of the district 
reserve bank. It should be arranged so that it could go current in 
any of the several districts of the country and should be redeemable 
at any reserve bank. 

John McHugh, 
President First National Bank, Sioux City, Iowa. 



Yes;' all currency should be based upon gold, with 50 per cent of 
gold reserve. 

S. H. BlJRNHAM, 

President First National Bank of Lincoln, Lincoln, Nebr. 



I think all currency should be based upon a reasonable gold reserve 
and that the gold standard of the country should under no circum- 
stances be changed, but that all currency should be as good as gold 
and redeemable in gold eventually. As to just what per cent of 
gold reserve should be required I am unable to state. 

Fred H. Quincy, 
President Planters'' State Bank, Salina, Kans. 



Granted that the present bond-secured currency of the national- 
bank system is to be abolished and currency to be issued only by a 
central reserve or regional reserve associations, then such currency 
should be based upon gold alone. Such gold reserve should be at 

48 



EEPLIES BECEIVED BY THE COMMITTEE. 49 

least 25 per cent of the amount of notes outstanding, and whenever 
the gold reserve falls below 25 per cent stringent restrictions should 
be framed to prevent a further issue. However, under great emer- 
gencies an overissue might be granted by and with the consent of 
the President of the United States, Secretary of the Treasury, and 
comptroller. 

A. L. Mills,, 
President First National Bank i Portland, Oreg. 



All currency should be based upon gold held by the issuing central 
source of reply. In this country probably a gold reserve of 60 per 
cent should be held to be normal, a graduated tax to follow each 
diminution of, say, 5 per cent. 

Wm. Ingle, 
Vice President Merchants-Mechanics National Bank, 

Baltimore^ Md. 



Any mobilized reserve contributed by banks generally should be 
gold or equivalent. For extraordinary issues little if any reserves 
are necessary, as they are but temporary measures. 

Andrew J. Frame, 
President Waukesha National Bank, Waukesha, Wis. 



No ; not gold alone, but gold, commercial paper, and good bonds. 

J. E. MULVANE, 

President Bank of Topeka, Topeka, Kans. 



Currency (not referring to gold certificates, warehouse receipts in 
fact for gold coin) should be based upon gold ; that is, the institution 
issuing them should have a substantial reserve of gold coin. Here 
again the percentage of reserve should not be fixed by law, but should 
be left to the judgment and discretion of the governing board. It 
must necessarily vary under different conditions from time to time. 

James K. Lynch, 
Vice President First National Bank of San Francisco. 



It should all be as good as gold, but not necessarily based on gold. 

J. H. Stewart, 

>Wichita, Kans. 



The only gold currency retained in circulation should be gold cer- 
tificates of deposit. 

Silver certificates of small denominations (less than $5) should re- 
main as the only means of utilizing our hoard of silver. 

Eugene Marshall, 

Manchester, Tenn. 



50 EEPLIES RECEIVED BY THE COMMITTEE. 

No; currency should not be based upon gold, only upon work or 
supplies for the Government. Gold is playing a smaller and smaller 
part in our monetary system. 

Karl F. M. Sandberg, 

Chicago, III. 



All currency should be based on gold values at 75 per cent of the 
appraised value of the property pledged. All values in this country 
are on a gold basis. The appraisement would be by bank directors 
forming a committee for the purpose, whose banks would be guaran- 
tors and interested in any loss on the collateral security. Conse- 
quently losses do not occur on clearing-house loans. 

As the property pledged is held by the clearing house as trustee 
for the note holder, the only gold reserve required is 5 per cent, which 
is the same as now provided for national-bank notes. 

Theodore Gilman, 

New York, N. Y. 

Currency of the country should be based upon gold, that being the 
accepted money of the civilized world. This head to the banks of 
the United States should carry the gold of the country both for the 
Government and the other banks. Against this gold it should have 
the right to issue its notes, which should be in every case redeemable 
in gold. The present stock of gold and other metal now in the vaults 
of the United States Treasury should be deposited in the vaults of 
this central organization, or kept in the present vault, subject to the 
call of the central organization and under the control of the central 
organization, and this organization should be the sole bank of issue 
in the United States. National-bank notes, gold and silver certifi- 
cates should be retired as rapidly as consistent, without disturbing 
business, and replaced by the notes of the central organization. 

J. E. Greenlees, 

Lawrence* Kans. 



Yes ; everybody well informed knows that there is not gold enough 
on earth to meet all the outstanding currency or notes payable in 
gold if demand for such payment were made at the same time; the 
reserve of gold ought to be approximately 10 per cent. 

Sigmund Feust, 
President South Bronx Property Owners' Association, 

New York City, N. Y. 



No currency should be based upon gold, as this makes the whole 
world speculate and gamble with our currency. All gold coined or 
in bullion should be held in the United States Treasury. Gold coin 
may be drawn from the Treasury by any citizen of the United States 
in exchange for legal-tender Treasury notes, providing that citizen 
gives security that he will pay a tax such as is levied on gold watches 
or other articles of luxury to the amount of 6 per cent per annum 



REPLIES RECEIVED BY THE COMMITTEE. 51 

until the gold coin so drawn shall be returned to the United States 
Treasury. Don't you think this would successfully protect our gold 
reserve ? 

Carl Pieper, 

, Menomonie, Wis. 



A nation's full legal-tender currency need not have a gold basis if 
it have a property basis — not a property " basis " for the purpose of 
giving value to the currency, but a property basis for the purpose of 
restricting the supply, regulating the volume, and for making the 
issue conform to the natural law governing the production of wealth 
by labor. To elucidate: 

Government money being the exchange equivalent of labor prod- 
ucts, the general welfare demands that there be no means whereby 
the equivalent can be obtained by anyone with a less expenditure of 
effort than is necessary to acquire the product itself. Hence no dis- 
cretionary power over the emission of currency or the volume thereof 
or the manner of its issue should be lodged in the Government official. 
The currency rights of the citizen should be clearly defined in the 
law, as are his other civil rights. Only through the issue of a rep- 
resentative currency can a just and practical currency system be 
inaugurated. 

James D. Holden, 

Denver, Colo. 



Assuredly not. No currency should be permitted. No reserve to 
bolster a promise to pay, of which it has been said that they exceed 
the limitation of nature and surpass the bounties of God. 

Geo. G. Merrick, 

Nyssa, Oreg. 



QUESTION NO. 10. 

If notes are issued to or by an association, what should be the limit in 
amount of this currency for each association, and should this limit be 
based on its capital stock or surplus ? 

ANSWERS. 

The amount of currency or credit to be issued to any bank in a 
district should be limited only by lack of ability of such bank to 
pledge proper security and refusal to pay the interest or tax exacted. 
It should be possible for a bank under unusual stress to go to a 
district reserve bank with its good assets and realize 75 per cent of 
the value thereof in currency or credit, or both, so long as the board 
of directors of such district reserve bank approved the paper and 
the conditions attending the application of the bank seeking the aid 
entirely warranted it. 

John McHttgh, 
President First National Bank, Sioux City, Iowa. 



The issue of notes should be by a central organization. 

S. H. BURNHAM, 

President First National Bank of Lincoln, Lincoln, Nebr. 



I think the notes issued by any association or associations should 
be limited and based on its capital stock and surplus, to which it 
would look for redemption. 

Fred H. Quincy, 
President Planters^ State Bank, Salina, Kans. 



If notes are to be issued by the national-bank associations as at 
present the limit should not exceed the capital stock of such associa- 
tion. In case of emergency it might be advisable to permit an 
additional circulation equal to 50 per cent of the surplus of the 
association. 

A. L. Mills, 
President First National Bank, Portland, Or eg. 

52 



REPLIES RECEIVED BY THE COMMITTEE. 53 

To induce conversion of excess surplus into capital with its double 
liability, capital stock only should be the basis. No bank, except 
under punitive tax, should be permitted to assume liability of any 
nature in excess of a fairly generous multiple of such capital, say, 20 
times its amount. 

Wm. Ingle, 
Vice President Merchants-Mechanics^ National Bank, 

Baltimore, Md. 

A graded tax upward will automatically regulate flexibility. 

Andrew J. Frame, 
President Waukesha National Bank, Waukesha, Wis. 



It should be based on the capital and surplus of the association, 
except in emergency, when aid should be given to each individual 
bank in amount not exceeding its capital stock, collateral as in No. 8. 

J. E. MlJLVANE, 

President Bank of Topeka, Topeka, Kans. 



Again this is a question that should be left to the judgment and 
discretion of the governing board. It is impossible to fix by statute 
a limitation that will not be insufficient in some cases and excessive 
in others. 

James K. Lynch, 
Vice President First National Bank of San Francisco. 



Double the amount of the capital and surplus of the members of 
the association. 

J. H. Stewart, 

Wichita, Kans. 

No currency notes should be issued except by the United States 
Treasury. 

All associations or combinations calculated to concentrate large 
reserves of money in the hands of a few banks should be positively 
forbidden. 

Such associations are the strongest weapons of monopoly and 
should be crushed with a strong hand. 

To all suggestions looking to the establishment or regulation of 
such institutions I say no. 

Eugene Marshall, 

Manchester, Tenn. 



No notes should be issued to or by an association. Currency should 
be issued by the Government only and solely for the use of the Gov- 
ernment. Issued by anybody else and for any other purpose it is 
counterfeit and should be treated as such. 

Karl F. M. Sandberg, 

Chicago. 



54 KEPLIES KECEIVED BY THE COMMITTEE. 

The limit in amount of the currency any bank could take out 
through its clearing house should be the par of its capital. Clearing 
houses are representative of the banks composing them and do not 
have any capital of their own. Each individual bank should have 
a right to its proportion of currency the same as every other bank. 
The bank is the unit, not the clearing house. 

Theodore Gilman, 

New York. 

Notes should neither be issued to or by an association, but should 
come from the central organization, which should be the head of the 
banks of the United States. 

J. E. Greenlees, 

Lawrence , Kans. 

From 25 to 33 per cent on its capital and surplus. Every new law 
is a kind of experiment. The figures given ought to be safe if the 
word " association " means bank. 

SlGMUND FEUST, 

President South Bronx Property Owners^ Association, 

New York City, N. Y. 

Questions from 10 to 31, both inclusive, are in the sole, exclusive in- 
terests of the banks ; have no other objects than to enlarge and solidify 
the power now possessed in the control of the monetary affairs of the 
people, applying for the purpose of private gain the most important 
function of the Nation ; also to create a list of salaried bank officials 
and employees. Manifestly all these reserve associations must incur 
large cost of operation, must also pay dividends, and have no source 
of income other than derived from loans, discounts, and exchange, 
all of which cost falls finally upon the productive industries of the 
people. The scheme is all evil, has no good in it, nor should it have 
a hearing before the United States Congress, supposed to legislate 
for the general welfare to the exclusion of private greed. No such 
scheme should be permitted. The United States Treasury Depart- 
ment is the only reserve needed or in any manner justifiable. It has 
the confidence of the people, can serve them efficiently, and has been 
and still is especially charged with the creation of and issuance of 
money. 

The Congress of the United States is by a positive grant author- 
ized to create money. All writers and authorities upon the Constitu- 
tion agree that " an affirmative grant is a negative to all other 
power." Therefore the Congress has no power to create, issue, nor 
to authorize the creation and issuance of something that is not money. 
The Supreme Court in the legal-tender cases held that money was a 
legal decree. As to this there can be no debate between honest stu- 
dents of monetary science. There is no such natural thing as money ; 
all money is a creation of law, and the material of which made does 
not and can not perform the money function. That function is con- 
ferred upon the material by positive law. Let the Congress resume 
its duty and obligation to create and issue money, dispensing with 
this credit monstrosity bank promises to pay. 

Geo. G. Merrick, 

Nyssa, Oreg. 



QUESTION NO. 11. 

What device should be provided to force the retirement of this cur- 
rency in whole or in part when the legitimate demands of trade subside ? 

ANSWER. 

A graduated rate of interest, say, the current rate of discount for 
the first 30 or 60 days, and thereafter an increasing rate up to 10 or 
even 12 per cent per annum, would retire such currency very quickly 
after it had served its usefulness. 

John McHugh, 
President First National Bank, Sioux City, Iowa. 



The notes should be redeemable in gold at the Treasury and 
should not be counted in the legal reserve, and that will retire them 
the moment the demand ceases. 

S. H. BUENHAM, 

President First National Bank of Lincoln, Lincoln, Nehr. 



I think in order to force retirement of this currency or to prevent 
unreasonable inflation that a reasonable amount should be permitted 
to be issued without any tax, and that above this point a graduated 
tax based on the length of time the currency is in circulation should 
be imposed. As to just what amount of currency should be per- 
mitted to be issued under normal conditions, I would be unable to 
suggest. It should be enough, however, to transact the ordinary 
business of the country, and above such point should be considered 
emergency and subject to some kind of tax to prevent inflation. 

Fred H. Quincy, 
President Planters'* State Bank, Salina, Kans\ 



The retirement of this currency in whole or in part should be pro- 
vided for by a steadily increasing tax in the shape of a rising rate 
of interest. 

A. L. Mills, 

President First National Bank, Portland, Oreg. 

55 



56 KEPLIES EECEIVED BY THE COMMITTEE. 

A tax on issues beyond a set limit progressively increasing in 
severity. 

Wm. Ingle, 
Vice President M erchants-M echmics National Bank, 

Baltimore, Md. 



A tax above a normal interest rate, increasing monthly to make 
issues unprofitable, is certain in its action. The Imperial Bank of 
Germany has issued a 5 per cent taxed currency, which is subject 
also to a gold reserve, over 150 times in the past 30 years. This brings 
true flexibility. That bank's untaxed currency is limited to 
$130,000,000. Were it not for the 5 per cent taxed flexible currency, 
Germany, doubtless, in her overstrained condition would be in a state 
of collapse. It is the only thing that has prevented it. 

Andrew J. Frame, 
President Waukesha National Bank, Waukesha, Wis. 



Establish a normal amount of issue proportionate to capital and 
surplus that a bank can always maintain as practically permanent 
circulation ; beyond that amount make the cost of additional issue so 
expensive both for amount and length of time outstanding that 
banks will be forced to reduce the excess at an early period. Increase 
the rate for time outstanding in some such manner as is now pro- 
vided in present emergency law. The high rate and the discredit of 
paying it has always caused the speedy retirement of clearing-house 
certificates, which have practically been an elastic emergency circula- 
tion. 

Robert D. Kent, 
President Merchants Bank of Passaic, Passaic, N. J. 



An interest charge of 3 per cent per annum on the emergency cur- 
rency for the first three months; thereafter an additional 1 per cent 
per month. 

J. R. Mulvane, 
President Bank of Topeka, Topeka, Kans. 



The currency issued by the association (or associations, if must be) 
should not be counted as reserve, and should be canceled as soon as 
it comes into the possession of the association issuing it, or any 
branch of such association. It is in fact a promissory note; or, if 
you please, a demand certificate of deposit, having back of it (a) 
gold coin, (b) discounted short-time commercial paper. 

James K. Lynch, 
Vice President First National Bank of San Francisco. 



There should be no bank currency. 

Harry B. Fish, 
Secretary People's Money League, Chicago, III. 



KEPLIES EECEIVED BY THE COMMITTEE. 57 

A high tax on it, payable to the Government. 

J. H. Stewart, 

Wichita, Kans. 

Currency should be exchangeable for 2 per cent bonds at the option 
of the holder. 

Currency being a part of the public debt, bearing no interest, 
should be issued in exchange for 2 per cent bonds whenever de- 
manded. 

Current money being at all times exchangeable for 2 per cent bonds, 
and 2 per cent bonds being exchangeable for current funds, the 
changes would become automatic, depending entirely upon the de- 
mands of business. 

Should the currency in circulation at any time become excessive, 
exchanges might be stimulated by a plan similar to that pursued by 
the Bank of England, which raises or lowers the rate of interest as 
the demands of business require. 

Eugene Marshall, 

Manchester, Tenn. 

There should be no banking currency. 

Karl F. M. Sandberg, 

Chicago. 



The pressure on borrowing banks to retiie clearing-house certifi- 
cates has always been found effective to secure the retirement of 
clearing-house certificates when they are no longer called for. All 
banks in a clearing house have a joint liability for their share in 
the loss on its loans and this contingent liability is the best device 
that can be proposed to secure contraction. There should also be 
power given to the Secretary of the Treasury to demand retirement 
of currency if in his opinion the public good requires its cancellation. 

See section 26 of my bill. 

Theodore Gilman, 

New York. 



No device would be required to regulate currency, as suggested 
before. 

J. R. Greenlees, 

Lawrence, Kans. 

Taxation of the issue. 

Sigmund Feust, 

President South Bronx Property Owners' Association, 

New York City, N. Y. 



QUESTION NO. 12. 

If a tax on this currency payable to the Government is provided, should 
it be graduated so as to increase with the volume of currency issued by 
the reserve association, or graduated so as to increase with the length of 
time it is outstanding ? 

ANSWERS. 

It should be graduated not on account of volume issued, but on 
account of length of time outstanding. 

John McHttgh, 

President First National Bank, Sioux City, Iowa. 



If there is a tax, it should be graduated as to the time. 

S. H. BlJRNHAM, 

President First National Bank of Lincoln, Lincoln, Neor. 



As heretofore stated, I think the tax should be based on the length 
of time. Currency over and above an amount necessary to transact 
the ordinary business of the country should be kept in circulation, 
which time and amount might be supervised in some way by the 
Comptroller of the Currency, who should be given some discretion 
in the matter. 

Fred H. Quincy, 
President Planters' 1 State Bank, Salina, Kans. 



This tax, or rather, the interest, to be charged upon the emergency 
currency should increase with the length of time the notes are out- 
standing; for example, the bank applying for such emergency cur- 
rency should pay interest at the rate of 6 per cent per annum for 
the first three months, and such rate should increase 1 per cent per 
annum for each additional month the currency is outstanding. 

A. L. Mills, 
President First National Bank, Portland, Oreg. 



Graduated to increase in both situations upon some complemen- 
tary plan which, in operating to reduce large urgency issues, would at 
the same time prevent abuse in continuing circulation subject to only 
a light punitive tax for nominal profit. 

Wm. Ingle, 
Vice President Merchants-Mechanics National Bank, 

Baltimore, Md. 

58 



EEPLIES RECEIVED BY THE COMMITTEE. 59 

See answer No. 11. 

Andrew J. Frame, 

President Waukesha National Bank. Waukesha, Wis. 



To provide against overexpansion, I would advocate a sliding scale 
on top both on volume (above normal) and for length of time out- 
standing. (See answer to No. 11.) 

Robert D. Kent, 
President Merchants Bank of Passaic, Passaic, N. J. 



The tax, or interest charge, should increase with the length of time 
outstanding. This tax should be payable to the association and be 
held by the association as surplus. 

J. E. MULVANE, 

President Bank of Topeka, Topeka, Kans. 



It is preferable to give the Government such share of the profits 
of the reserve association or associations as may be found equitable, 
rather than to tax directly the circulating notes. If a tax is provided 
for at all, it should be only upon an extraordinary emergency issue. 

James K. Lynch, 
Vice President First National Bank of San Francisco. 



There should be no currency issued by banks. 

Harry B. Fish, 

Secretary Peopled Money League, Chicago, III. 



Graduated with the time outstanding. 

J. H. Stewart, 

Wichita, Kans. 



Under the plan suggested currency should not be taxed. 

Eugene Marshall, 

Manchester, Term. 

There should be no bank currency. 

Karl F. M. Sandberg, 

Chicago. 

No tax on clearing-house currency should be provided. It is 
sufficiently strong not to need one. Clearing houses have found a 
way in recent panics of issuing checks which serve as currency and 
have saved whole sections of the country from bankruptcy. The 



60 REPLIES RECEIVED BY THE COMMITTEE. 

cost of this currency is the printing, which is nominal. If the Gov- 
ernment fixes a tax on its currency, the clearing houses will adopt 
their own style of currency, because it is cheaper and equally safe. 

All banks have declined Secretary McAdoo's offer of $500,000,000 
of currency because it costs 5 per cent at first with a rising scale up to 
10. They could not reloan the money except at a loss. Banks can 
not be expected to do business at a loss. 

Before asking for currency from the Government, the banks would 
first call in all their cheap money, which process causes forced 
liquidations and an increased demand for loans. This raises the 
rate for money and makes a disturbance. If continued long enough, 
there would be a scare and a frantic bidding up for money, and 
then the situation would be sufficiently acute to warrant the banks in 
applying for loans of currency from the Government. It is re- 
spectfully submitted that this is not a good system for the Govern- 
ment to adopt. 

Other arguments are set forth in my statement submitted to the 
Finance Committee of the United States Senate January 7, 1908, a 
copy of which is attached hereto. (See p. 10.) 

Credit currency should not be placed beyond the reach of the 
people. It should be issued early, so as to be preventive of panics 
and not a remedy after the attack. 

Theodore Gilman, 

New York. 



There should be no tax on this currency, as you can not tax the 
currency without taxing the people who use it. 

J. R. Greenlees, 

Lawrence, Kans. 

Both, but the graduation fairly moderate. 

Sigmund Feust, 
President South Bronx Property Owners' Association, 

New York City, N. Y. 



QUESTION NO. 13. 

Should there be a central reserve association with branches, or a num- 
ber of reserve associations with or without a central control? If a num- 
ber of reserve associations under central control, should that control be 
wholly with representatives of the various associations, or wholly by 
the Government, or by giving both representation ? 

ANSWERS. 

There should be district reserve banks of discount for banks, such 
district reserve bank to be owned by the banks of the district and 
to be under the joint control of the Government and bankers and 
business men, properly selected. In addition there should be a gen- 
eral, joint, supervising agency over all districts. 

John McHugh, 
President First National Bank,, Sioux City, Iowa. 



There should be a central reserve association with branches, under 
the control of a board of directors composed of bankers, business 
men, and Government officials. 

S. H. BUKNHAM, 

President First National Bank of Lincoln, Lincoln, Nebr. 



I am inclined to think that a number of reserve associations with 
central control, which would be participated in by both the associa- 
tions and the Government, would be as efficient as any system that 
could be devised. 

Fred M. Quincy, 
President Planters'' State Bank, Salina, Kans. 



As our ancestors thought that a united Republic was stronger than 
13 separate States, so a central reserve association, with branches, is 
better than a number of regional reserve associations. However, if 
such central reserve association can not be established under present 
conditions, the country will be vastly better off under properly or- 
ganized regional reserve associations than at present. Except that 
the Government should have representation, the central control 
should be placed in the hands of representatives of the various asso- 
ciations, as they alone are competent properly to administer the 
finances. 

A. I.. Mills, 
President First National Bank, Portland, Oreg. 

61 



62 REPLIES RECEIVED BY THE COMMITTEE. 

I believe there should be a central reserve association with branches, 
but I do not believe a number of reserve associations would be a 
good thing without central control, and that control should be in the 
hands of both the Government and the members of the association, 
as nearly equally divided as possible. 

D. N. Fink, 
President Commercial National Bank, Muskogee, Okla. 



Infinitely better to have a central reserve with as many branches 
as may be found necessary. A number of reserve associations with 
central control would or should mean the same thing. 

Disunited or independent associations would be unfortunate, and 
would mean only a lessening of present evils in giving, say, 50 units 
instead of the present number, say, 8,000 banks; while possibly the 
Government should have a small minority representation on con- 
trolling board, its function should be only that of regulation under 
law and Public Printer. 

Wm. Ingle, 
Vice President Merchants-Mechanics National Bank, 

Baltimore, Md. 

Make the interest rate for loans above normal, and control is im- 
material. Expansion and contraction of currency, etc., will be auto- 
matic. The three cities mentioned are ample for all purposes. As 
we are interdependent, a relief measure in great centers gives relief 
to all. If New York banks could have had such relief in 1907, banks 
generally would not have suspended, but kept on the even tenor of 
their way. 

Andrew J. Frame, 
President Waukesha National Bank, Waukesha, Wis. 



Let there be a central reserve association, or, preferably, a bank 
of the United States; provided, however, that the institution shall 
not compete with banks, and that its only customers shall be banks 
and the United States Government. Control to be by Government 
officials and appointees and by representatives of stockholders. 

Robert D. Kent, 
President Merchants Bank of Passaic, Passaic, N. J. 



I favor 15 reserve associations, two-thirds of the members of which 
shall be bankers and the other third representatives of the United 
States Government. 

J. R. Mtjlvane, 
President Bank of Topeka, Topeka, Kans. 



(1) In my judgment there should be one central reserve associa- 
tion with branches. This is the logical method, and much more easy 
to control than a number of separate associations. 



REPLIES RECEIVED BY THE COMMITTEE. 63 

(2) If a number of reserve associations are established, the con- 
trol might properly be in the hands of a board, which should consist 
of representatives from the various associations, and also from the 
United States Government. 

James K. Lynch, 
Vice President First National Bank of San Francisco. 



No ; there should not be any " central reserve association," or " num- 
ber of reserve associations." Any law creating such ones legalizes 
the financial trust. 

Harry B. Fish, 
Secretary People's Money League, Chicago, III. 



A central reserve association is not needed. Let each association 
be independent, and let individual banks cooperate in handling busi- 
ness as they do now. This would give all the interchange and addi- 
tional assistance needed. 

J. H. Stewart, 

Wichita, Kans. 

No; there should not be any "central reserve associations," or 
" number of reserve associations." Any law creating such ones legal- 
izes the financial trust. 

Karl F. M. Sandberg, 

Chicago. 

Reserve associations of the various kinds are all of a class, and all 
have the same inherent defects. By their intricate methods of elect- 
ing officers and directors they can be attacked in detail and captured 
by designing combinations of capital. The country has decided 
against the idea of centralization, and it will never approve any plan 
which squints in that direction. 
Reserve associations have been discussed in answer to question 7. 

Theodore Gilman, 

New York. 



A central reserve association with branches is along the line sug- 
gested, but it should not be a reserve association, but a real bank. 
There should be but the one central organization, and each bank, 
through joint ownership of this organization, would be in reality a 
branch of the central institution. I believe that such an organiza- 
tion can be made and the ownership so distributed through the local 
ownership of the individual unit banks, which would be its branches 
in a certain sense, so that every nook and corner of the United States 
would own its just proportion of the central organization through 
its ownership of this local bank. If you can not work out a scheme 
of organization of this kind, leaving the control of it in the hands of 
the officers of that organization, then adopt the German idea out- 
3056—13 5 



64 EEPLIES KECEIVED BY THE COMMITTEE. 

right and have the capital of this organization provided, as sug- 
gested, by unification of the banks, and then have the central or- 
ganization administered under the direction and control of the Treas- 
ury of the United States, Comptroller of the Currency and Director 
of the Mint. Put on the board with these gentlemen such other 
bankers and business men from the country at large as would give 
a sound, safe, representative control of the central organization, but 
all under the control of the Government. Personally, I do not be- 
lieve that this is necessary or even advisable. 

J. R. Greenlees, 

Lawrence, Kans. 

No ; the reserve associations are too similar to the scheme of a 
United States bank. 

Sigmund Feust, 
President South Bronx Property Owners' Association, 

New York City, N. T. 



QUESTION NO. 14. 

Should such reserve association have a geographical territory and 
exercise the functions of a reserve bank in such territory exclusively ; or 
should member banks of any reserve association be permitted to exercise 
a choice as to which of the near-by or contiguous reserve associations they 
should join without regard to fixed territory? 

ANSWERS. 

A district should be determined by geographical territory and 
similarity of seasonal requirements in territory selected. Bankers 
within such territory should be confined in their dealings to the 
reserve bank of that territory. 

John McHugh, 
President First National Bank, Sioux City, Iowa. 



The branches of the central organization should be located geo- 
graphically, and member banks should be restricted to the territory 
covered by that branch. 

S. H. BURNHAM, 

President First National Bank of Lincoln, Lincoln, Nebr. 



I would say that member banks should be permitted to join the 
association most convenient in point of location for them to transact 
business with in preference to a fixed territory. 

Fred H. Quincy, 
President Planters'* State Bank, Salma, Kans. 



Regional reserve associations should be established according to 
the financial needs of the country without reference to geographical 
distribution. After such financial division has been made no mem- 
ber bank should be permitted to change its allegiance without con- 
sent of the central board of control; to do so might permit a com- 
bination of many of the principal banks of the country in one regional 
reserve association. Unless a palpable error has been made in the 
original division of territory no bank should be permitted to exercise 
r choice of a regional reserve association. 

A. L. Mills, 
President First National Bank, Portland, Oreg. 

65 



66 REPLIES RECEIVED BY THE COMMITTEE. 

My opinion is that there should be a territory governing the branch 
reserve agents, operating under the central control, and that banks 
located in that territory should be compelled to do their business 
through that branch, unless it could be shown that it would be a 
great inconvenience for it to do so. 

D. N. Fink, 
President Commercial National Bank, Muskogee, Okla. 



A branch reserve association should minister exclusively to its own 
territory, and all banks in such territory should deal only with their 
local reserve. (In this connection read answer to query 21.) 

Wm. Ingle, 

Vice President Merchants-Mechanics' National Bank, 

Baltimore, Md. 



Not material. Let each bank select its own depository or reserve 
city. 

Andrew J. Frame, 
President Waukesha National Bank, Waukesha, Wis. 



Yes, as to territory, as far as possible, but without making this an 
ironclad rule. The banks should have the option of using the nearest 
association. 

J. E. MULVANE, 

President Bank of Topeka, Topeka, Kans. 



It would appear to me more desirable to allow banks to transact 
their business with any of the branches of the reserve association 
that were most conveniently located for their purposes. It will prove 
difficult to district the country by rigid lines. In many cases the 
commercial requirements will not be those that are anticipated or 
that now exist. The less prohibition that there is in the act the better 
it will work in practice. 

James K. Lynch, 
Vice President First National Bank of San Francisco. 



There should not be any reserve associations. 

Harry B. Fish, 

Secretary People's Money League, Chicago, III. 



Have a geographical territory arranged largely by the natural 
business centers and operations. 

J. H. Stewart, 

Wichita, Kans. 



KEPLIES RECEIVED BY THE COMMITTEE. 67 

There should not be any reserve associations. 

Karl F. M. Sandberg, 

Chicago, III. 

The viciousness of the regional reserve bank comes out when it is 
proposed each shall hold all the reserves of its territory exclusively. 
The anxious question would always be uppermost in the banks of a 
district, What is happening to our regional reserve bank ? All busi- 
ness men are now eager to know how the reserves in reserve cities 
stand, but that anxiety would be much greater if regional reserve 
banks were established. 

Reserve cities should not be limited as to the banks for which they 
may act as reserve agents, but localities for the distribution of cur- 
rency can safely be multiplied and all banks should be restricted to 
doing business with the bank of issue in their district. If banks 
could take out currency from any clearing house of issue, its home 
clearing house would not know how it stood financially. 

There should be one clearing house of issue in each State, and in 
a few instances there might be two, as New York City and Buffalo, 
Philadelphia and Pittsburgh, Cincinnati and Cleveland, St. Louis 
and Kansas City, and San Francisco and Los Angeles. 

Theodore Gilman, 

New York, N. Y. 

No; do not cumber the association with a multiplicity of reserve 
associations. You simply weaken your structure. The simpler and 
more direct you can build this head organization, the more satisfac- 
tory it will work, and the better service it will give to the country. 

J. R. Greenlees, 
Lawrence, Kans. 

No. 

SlGMUND FEUST, 

President South Bronx Property Owners'* Association, 

New York City, N. Y. 



QUESTION NO. 15. 

Should such reserve associations have State banks and trust companies 
as stockholders ; and, if so, what requirements should be made of such 
State banks and trust companies? 

ANSWERS. 

State banks and other banks under State supervision should be 
permitted but not required to become shareholders of reserve banks. 
When they do they should be permitted discount and currency privi- 
leges the same as national banks. 

John McHugh, 
President First National Bank, Sioux City, Iowa. 



The central reserve association should admit under proper regula- 
tions National and State banks and trust companies. 

S. H. Burnham, 
President First National Bank of Lincoln. 



As more than 65 per cent of the banking business of the United 
States is done to-day by State banks and trust companies they cer- 
tainly should be permitted to participate in any system of currency 
and credit that would be established upon approximately equal terms 
with national banks, perhaps with the supervision of some State 
banking department approximately equal to national inspection and 
requirements in regard to capital, surplus, reserve, etc. 

Fred H. Quincy, 
President Planters' State Bank, Salina, Kans. 



State banks and trust companies should be permitted to become 
stockholders of reserve associations and have all the privileges 
granted to other stockholders; provided, however, they submit to 
the same restrictions and limitations that are imposed upon national 
banks. 

A. L. Mills, 
President First National Bank, Portland, Oreg. 

68 



REPLIES RECEIVED RY THE COMMITTEE. 6£ 

I doubt the wisdom of allowing State banks and trust companies 
to be members of the association as stockholders, for it occurs to 
me that if they desire to get into the list it would be their duty to 
nationalize. However, I would not have any serious objection to 
allowing certain privileges to be extended to them in the way of 
loans, rediscounts, etc. 

D. N. Fink, 
President Commercial National Bank, Muskogee, Okla. 



Any answer opens large questions. Until banking can be nation- 
alized as should be done no State chartered institution should have 
the privilege of membership in reserve association. If, however, 
such corporation would formally place themselves under the author- 
ity of the Federal Government, if this be possible, and consent to 
be controlled by the same law governing national banks in regard to 
capital, reserve, loans, etc., there could be no objection to their 
membership. 

Wm. Ingle, 
Vice President Merchants-Mechanics National Bank, 

Baltimore, Md. 



If member banks deposit part of present reserves merely to mobi- 
lize funds, capital stock is not necessary, especially if operative 
through clearing houses or subtreasuries. State banks and trust 
companies should share in equal privileges on complying with like 
requirements as to national banks. 

Andrew J. Frame, 
President Waukesha National Bank, Waukesha, Wis~.> 



Yes ; all banks, State and National, and trust companies should be 
on an equal footing. 

J. R. MULVANE, 

President Bank of Topeka, Topeka, Kans. 



There will be no adequate solution of the banking and currency 
question until the banks (except savings banks pure and simple), 
State and National alike, are allowed to join the association. Where 
the State laws regarding capitalization and supervision are obviously 
inadequate, it would certainly be proper to establish a minimum of 
requirements that must be met before allowing such banks to join 
the association. 

James K. Lynch, 
Vice President First National Bank of San Francisco. 



There should not be any reserve associations. 

Harry B. Fish, 
Secretary Peopled Money League, Chicago, III. 



70 KEPLIES KECEIVED BY THE COMMITTEE. 

Yes ; but all members should have a capital of $25,000 or over. 

J. H. Stewart, 

Wichita, Kans. 



There should not be any reserve associations. 

Karl F. M. Sandberg, 

Chicago. 



. Always eliminating the " reserve " idea and substituting for it the 
clearing-house idea, it should be provided that all State banks and 
trust companies should be entitled to membership in national clear- 
ing houses on presentation of the certificate of the banking depart- 
ment of their State. They should be required, as an essential con- 
dition to membership, to conform to the requirements of the national- 
bank act as to reserves. 

Theodore Gilman, 

New York. 



By all means provide that State banks, loan and trust companies 
should join with the national banks, and each have their pro rata 
share of the stock in this central organization, which could be pro- 
vided by their paying in 15 per cent of their paid-up capital. 

J. R. Greenlees, 

Lawrence, Kans. 



No. 

SlGMUND FEUST, 

President South Bronx Property Owne^ Association, 

New York City, N. Y. 



CtUESTION NO. 16. 

Approximately, how many regional reserve associations should there 
be if that system is adopted? What, if any, should be the minimum 
capital stock, and what amount of stock should each member bank hold ? 

ANSWERS. 

Approximately 15 districts; possibly less; the number to be 
determined after very careful consideration. Banks should be re- 
quired to purchase snares in the district reserve banks in amount 
equal to at least 10 per cent of paid-up capital of the bank becoming 
the shareholder. This should be paid in in gold. 

John McHugh, 
President First National Bank, Sioux City, Iowa. 



The fewer number of regional reserve associations the better. 

S. H. BlTRNHAM, 

President First National Bank of Lincoln, Lincoln, Nebr. 



If regional reserve associations are established, there should be 
enough to accommodate the banks of the country conveniently. The 
channels of trade to-day are pretty well established in this respect 
and ought not to be seriously interfered with. As to the amount of 
minimum stock this should be ample to furnish unquestioned security 
for the amount of currency to be issued by each, and each member 
bank should be required to own from 10 to 20 per cent of their capital 
stock and surplus in such stock, or an amount sufficient to guarantee 
ample capital to the reserve association and should be furnished out 
of and be counted as surplus by the participating banks. 

Fred H. Quincy, 
President Planters'' State Bank, Salina, Kans. 



There should be at least 12 regional reserve associations, say, 3 
on the Pacific coast, 4 in the Middle West, and 5 on the Atlantic 
coast. The capital stock of a regional reserve association should not 
be less than $5,000,000, and each member bank should hold stock 
equal to 10 or 20 per cent of its paid-up capital. 

A. L. Mills, 
President First National Bank, Portland, Oreg. 

71 



72 KEPLIES RECEIVED BY THE COMMITTEE. 

Perhaps the control bank of the associations should be located 
either in Washington or some other large city, centrally located, 
preferably Chicago or St. Louis, and the branches should be located 
at convenient places in the larger cities of the United States, not 
allowing too many — perhaps the city of New York, Philadelphia, 
Chicago, St. Louis, Kansas City, Mo., some intermediate point in the 
Ohio and Mississippi Valleys, New Orleans, Dallas, Denver, Salt 
Lake City, San Francisco, and perhaps Portland and St. Paul. 

It occurs to me that these points would very conveniently cover the 
territory they would be called on to serve. 

D. N. Fink, 
President Commercial National Bank, Muskogee, Okla. 



Probably 15 for the entire country would be sufficient, or one each 
for every group of States subject in a general way to like conditions 
and demands for capital. 

Capital stock largely a question of arithmetic, the answer depend- 
ing upon several factors. (Are we to have one bank with branch 
offices or several independent but related regional reserves, and are 
State institutions to join?) 

Wm. Ingle, 
Vice President Merchants-Mechanics National Bank, 

Baltimore, Md. 

Do not believe a central bank with branches or, what is the same 
thing, branch regional reserve associations necessary. What we need 
is extraordinary rediscounts for cash in abnormal times, and our 
present central reserve banks will care for us in normal times. 
Monopolistic and expensive machinery are both unnecessary. 

Andrew J. Frame, 
President Waukesha National Bank, Waukesha, Wis. 



Not less than 15. The member banks should be limited to an 
amount of stock equal to not over 20 per cent of their respective 
capital. Ten per cent would probably be enough. 

J. R. Mulvane, 
President Bank of Topeka, Topeka, Kans. 



(1) It will be very difficult to properly fix the proportion of capi- 
tal in the case of regional associations. In the case of a central in- 
stitution with branches this question would adjust itself automatically 
and could be changed from time to time with the varying require- 
ments of the country. 

(2) I have no adequate data upon which to compute the capitaliza- 
tion, but in the case of a central association with branches, in lieu of 
the regional associations, I would regard $100,000,000 as sufficient. 

James K. Lynch, 
Vice President First National Bank of San Francisco. 



KEPLIES RECEIVED BY THE COMMITTEE. 73 

There should not be any reserve associations. 

Harry B. Fish, 
Secretary People's Money League, Chicago, III. 



Thirty to forty associations. Minimum capital from $5,000,000 as 
a minimum up. Each member holding an interest in proportion to 
its capital and surplus. 

J. H. Stewart, 

Wichita* Kans. 



There should not be any reserve associations. 

Karl F. M. Sandberg, 

Chicago. 

There should be a clearing house of issue in each State and subdi- 
vision of a State. Clearing houses have no capital, as they are rep- 
resentative of all the capital of all their banks. State laws and State 
boundaries are well established and less confusion would result from 
adopting that division than from any other. 

If the banking capital of a State is small, the privilege of note 
issue would be small also. Much good would result from the inti- 
mate knowledge bankers have of the credit and resources of business 
men in their State and from the ability of each State to foster its 
own enterprises and furnish the lifeblood of trade to its own people. 

Theodore Gilman, 



None whatever. 



New York. 



J. R. Greenlees, 

Lawrence* Kans. 



No. 

SlGMUND FEUST, 

President South Bronx Property Owners' Association, 

New York City, N. Y. 



QUESTION NO. 17. 

How should the directors of a reserve association be elected? What 
should be their number, powers, and term of office ? 

ANSWERS. 

The number of directors of such district reserve bank is a matter 
of detail dependent largely upon the activity and requirements of 
the district. Generally speaking, I would favor a board of 12 mem- 
bers, 5 to be bankers, 4 to be selected from different businesses out- 
side of that of banking, and 3 to be Government officials, the latter 
to be permitted to delegate their power, if necessary, to the manager 
of the district reserve bank. The terms of office at the beginning in 
the case of bankers to be 2 for one year, 2 for two years, and 2 for 
three years; in the case of the business men outside of the bankers, 
2 to be for two years and 2 to be for three years ; at the expiration of 
terms, the vacancies to be filled for three years in each case. The 
bankers and the business men should be nominated within 30 days 
of the time of election and then selected by a mail ballot in which all 
the shareholders would be permitted to have one vote for each share- 
holder, regardless of number of shares owned. 

John McHtjgh, 
President First National Bank, Sioux City, Iowa. 



I should say that the directors of the reserve associations should be 
elected by a vote of the member banks, each bank having one vote. 
As to the number, powers, terms of office, etc., this is a mere matter of 
detail, although perhaps very important, especially as to the powers. 
They should have ample power, in my judgment, to do whatever 
might be necessary to transact the business of the association without 
too many restrictions. 

Fred H. Qttincy, 
President Planters^ State Bank, Salina, Kans. 



There should be 9 directors of the regional reserve association, 
6 to be elected by the stockholders of the association and 3 to 
be appointed by the central board of control from a list to be pre- 
pared by the bank examiners of 20 reputable business men of the 
community. The directors should serve for three years and provision 
should be made for an election of 3 of the members each year. 

A. L. Mills, 
President First National Bank, Portland, Oreg. 

74 



KEPLIES RECEIVED BY THE COMMITTEE. 75 

The directors should be elected, half by the association member- 
ship, and the other half by the President of the United States, on 
confirmation of the Senate, and should serve for a period of five 
years, having them elected and appointed to begin with on long and 
short terms, so that a greater number than half would not retire at 
one time. I think the members should be chosen one from each 
branch of the association, and an equal number appointed by the 
President, who shall select them from a territory covering as wide a 
scope as those that are selected by the branch associations, that is to 
say, that the appointments should not be confined to one part of the 
United States. 

D. N. Fink, 
President Commercial National Bank, Muskogee, Okla. 



A detail to be worked out with comparative ease once the base is 
determined upon. 

Wm. Ingle, 

Vice President Merchants-Mechanics National Bank, 

Baltimore, Md. 



It is immaterial if a few good men pass on the paper taken. The 
interest or tax rate will automatically fix expansion and contraction. 
If done through the clearing houses or subtreasuries, the machinery 
is nearly all there now. 

Andrew J. Frame, • 
President Waukesha National Bank, Waukesha, Wis. 



There should be, say 25 directors, with an executive committee of, 
perhaps, 6, and the president of the association, the president being 
exofficio as a member of the executive committee. 

J. E. MULVANE, 

President Bank of Topeka, Topeka, Kans. 



(1) By the stockholders under a method of adjustment between 
the shares owned and number of stockholders, that would preclude 
the monopolization of the control of the bank by any interest or 
interests. 

(2) Details that I am not prepared to answer. 

James K. Lynch, 
Vice President First National Bank of San Francisco. 



There should not be any reserve associations. 

Harry B. Fish, 
Secretary People's Money League, Chicago, III. 



76 REPLIES RECEIVED BY THE COMMITTEE. 

By ballot, from 7 to 13 in members, and their term of office at 
least two years. 

J. H. Stewakt, 

Wichita, Kans. 



There should not be any reserve associations. 

Karl F. M. Sandbekg, 

Chicago, III. 



Directors should be elected for a clearing house of issue by a direct 
primary. The circuitous way analogous to the election of Senators 
by legislatures should be discarded, and directors should be elected 
so as to hold their allegiance to their own banks and their own 
people. The regional-bank idea offends in this particular, and such 
a bank can not be constructed on any other. The plan of indirect 
election and appointment of directors invites corruption and insures 
scandals. 

Theodore Gilman, 

New York. 



None whatever. 

J. R. Greenlees, 

Lawrence, Kans. 

No. 

Mr. Sigmund Feust, 
President South Bronx Property Owners' 1 Association, 

New York City, N. Y. 



QUESTION NO. 18. 

What should be the general nature of the business of such an asso- 
ciation ? 

ANSWEES. 

The general nature of the business of such district reserve bank 
to be to act as depositary for the Government, to be a bank of dis- 
count and issue for shareholder banks. Shareholder banks might 
keep what deposit they might determine with such district reserve 
bank, but at no time a less amount than 10 per cent of their deposits. 
Each district reserve bank's surplus funds could be loaned upon 
demand, or such time as the experience and prudence of its board, 
concurred in by the general supervising agency, would suggest and 
determine, either to other reserve bank or banks or upon prober 
commercial paper, but under no circumstances should such district 
reserve banks enter into competition in the open market or become 
a bank of deposit except in so far as it would serve the banks of 
its own district as a bank of deposit. 

John McHugh, 
President First National Bank, /Sioux City, Iowa. 



Discounting for members of the association. 

S. H. BlJRNHAM, 

President First National Bank of Lincoln, Lincoln, Nebr. 



The general nature of the business of such an association should 
be to receive deposits of member banks and the Government and to 
deal in credits and currency; and currency, in my judgment, should 
be as e lastic and liquid as credit, in view of the fact that 95 per cent 
or more of the business of the country to-day is transacted with 
bank checks and drafts and bank accounts and credits. 

Fred H. Quincy, 
President Planters' State Bank, Salina, Kan®. 



A regional reserve association should be a bank of banks. In a 
general way, it should have the right to issue currency and to dis- 
count paper of its member banks. It should be permitted to deal in 



77 



78 REPLIES EECEIVED BY THE COMMITTEE. 

exchange and sell and purchase bullion. Its dealings should be 
confined to the Government and to member banks of associations. It 
should not be permitted to receive deposits of individuals nor be 
permitted to deal directly with the community. 

A. L. Mills, 
President First National Bank, Portland, Oreg. 



The nature of the business of the central association should be to 
receive deposits and make loans to its membership only. 

D. N. Fink, 
President Commercial National Bank, Muskogee, Okla. 



Eeserve associations should hold balances only from their respec- 
tive banking owners and the Government and should have no busi- 
ness whatever with the public. They should not act as collection 
agents or otherwise compete with independent banking. Their funds 
should be employed in furnishing accommodation to their owners or 
to each other and to investment in United States bonds. 

Wm. Ingle, 
Vice President Merchants -Mechanics National Bank, 

Baltimore, 31 d. 



To act like a water reservoir, to put out a fire in its incipiency and 
refill again ready for future troubles. Practically inactive in normal 
periods, that the reservoir of cash may not be empty when needed. 
In the words of the bullion report of 1810 to the House of Commons, 
in panic periods " it is the duty of the bank to discount freely to all 
solvent parties." That operation kills panic, but at high rates to 
force quick retirement of extra issues and expanded credit. 

Andrew J. Frame, 
Waukesha National Bank, Waukesha, Wis. 



The association should be a depository for the member banks, 
should discount their paper for them, and be empowered to procure 
emergency currency for them when required. 

J. E. MULVANE, 

President Bank of Topeka, Topeka, Kans. 



(1) Transacting the Government business, which will include the 
deposit of the Government store of gold, except such coin as may be 
held against gold certificates. 

(2) The discount of approved commercial paper and the gradual 
development of a true discount market, which must deal to a consid- 
erable extent in bank acceptances. 

James K. Lynch, 
Vice President First National Bank of San Francisco. 



KEPLIES RECEIVED BY THE COMMITTEE. 79 

There should not be any reserve associations. 

Harry B. Fish, 

Secretary Peopled Money League, Chicago, III. 



To effect an organization and arrange all details to be ready to 
operate, and then the officers familiarize themselves with general 
conditions of the territory and the members of the association. In- 
vesting capital stock as required by law. 

J. H. Stewart, 



Wichita, Kans. 



There should not be any reserve associations, 

Karl F. M. Sandberg, 

Chicago. 



The holding of the reserves of a district should not be committed 
to a single association, as such a plan introduces a new element of 
danger into the banking situation besides opening the gates to cor- 
ruption. The present method of holding reserves wherever the con- 
venience of the depositing bank requires and its interest dictates 
should be continued. It has worked well and should not be changed. 

The business of distributing currency is one which fits in with the 
other duties and work of a clearing house, and should be made part 
of the general plan of clearing houses which has spread over the 
country and which is understood by all bankers. 

Theodore Gidman, 

New York. 



There should be none. 

J. E. Greenlees, 

Lawrence, Kans. 



No. 

SlGMUND FEUST, 

President South Bronx Property Owners' Association, 

New York City, N. Y. 



3056—13 6 



QUESTION NO. 19. 

Should it accept any deposits other than those of banks, and should 
it be allowed to pay interest on deposits ? 

ANSWERS. 

It should receive no deposits except those of the Government and 
the banks of its district, and it is doubtful if it should pay any inter- 
est thereon. 

John McHugh, 
President First National Bank, Sioux City, Iowa. 



It should not be allowed to receive deposits other than those of 
banks, and should not be allowed to pay interest on deposits. 

S. H. BURNHAM, 

President First National Bank of Lincoln, Lincoln Nebr. 



I do not think such an association should be permitted to accept 
deposits other than banks, except from the United States Govern- 
ment, and I think such an association should transact all of the Gov- 
ernment's business, and my present opinion is that it should not be 
permitted to pay interest on any deposit, as the currency and credit 
furnished by such an association is for the benefit of all the people 
of the country and any interest charge would simply be, in the final 
analysis, a tax upon the people. 

Feed H. Quincy, 
President Planters'' State Bank. Salina. Kans. 



It should not be permitted to accept deposits other than those of 
member banks of the association or other associations and it should 
not be permitted to pay interest on deposits. 

A. L. Mills, 

President First National Bank, Portland, Oreg. 



I do not think it should be allowed to receive business other than 
from its own membership, and should pay interest on the same at the 
rate of 2 per cent on daily balances. 

D. N. Fink, 

President Commercial National Bank, Muskogee, Okla. 

80 



EEPLIES KECEIVED BY THE COMMITTEE. 81 

No interest at fixed rate should be paid, but if profits permit after 
paying dividend provided by law, fixed and other charges, and proper 
provision for moderate surplus, the excess should be divided pro rata 
amongst depositors. 

Wm. Ingle, 
Vice President Merchants-Mechanics National Bank, 

Baltimore, Md. 



No. No interest to be paid on mobilized reserves deposited, nor 
loaned in normal times, as that process would take from each bank 
a part of its reserve cash, then if loaned the purpose would be de- 
stroyed by dissipating the cash reserve in competing for loans against 
the depositors out of their own reserves. That plan is simply acces- 
sory to one's own hanging. It is not a plan for relief in trouble and 
is absolutely indefensible. 

Andrew J. Frame, 
President Waukesha National Bank, Waukesha, Wis. 



No, as to deposits of the public. 

It should pay 2 per cent interest on deposits of member banks. 

It should be a bankers' bank. 

J. R. MuLVANE, 

President Bank of Topeka, Topeka, Kans. 



Other than the deposits of the United States Government it should 
accept deposits from banks only. It would probably be inadvisable 
for the association to pay interest, but this should not be prohibited 
by law, as in certain instances it might prove both profitable and 
advisable to pay such interest. 

James K. Lynch, 
Vice President First National Bank of San Francisco. 



There should not be any reserve associations. 

Harry B. Fish, 
Secretary People's Money League, Chicago, III. 



I would not organize to make profit but for protection and would 
not accept deposits other than of securities to issue currency on and 
would not pay interest, 

J. H. Stewart, 

Wichita, Kans. 



There should not be any reserve associations. 

Karl F. M. Sandberg, 

Chicago. 



82 REPLIES RECEIVED BY THE COMMITTEE. 

This question develops another defect in the regional bank system. 
Such a bank would compete with other banks and have a great ad- 
vantage over many from its control of reserves and the currency 
function. 

Banks which issue currency should not have any banking business 
to care for. The issue of currency should be impartial and not be 
used as a means of influencing deposits or other business. In the 
hands of designing men this great power would be used to the detri- 
ment of the public. 

Theodore Gilman, 

New York. 



No. Provide that your central organization should do business 
only with the banks of the country and the Government and pay no 
interest on deposits. 

J. R. Greenlees, 

Lawrence, Kans. 



No. 

SlGMUND FEUST, 

President South Bronx Property Owners' Association, 

New York City, N. Y. 



QUESTION NO. 20. 

Should it discount double-name commercial paper for its member banks 
on equal terms to all, and should its discount rate be public, subject to 
change weekly? 

ANSWERS. 

It should discount any proper paper for banks which its board 
would approve, always holding its resources in condition for such 
demands. Such paper as it might take from shareholder banks 
should be guaranteed by the borrowing bank. 

John McHugh, 
President First National Bank, Sioux City, Iowa. 



It should discount double-name commercial paper for its mem- 
ber banks on equal terms, and its discount rates should be public. 

S. H. BURNHAM, 

President First National Bank of Lincoln, Lincoln, Neor. 



It should discount prime commercial paper for member banks 
bearing their indorsement on equal terms to all members, and I see 
no objection to this discount rate being public and subject to weekly 
change. 

Fred H. Quincy, 
President Planters'* State Bank, Salina, Kans. 



It should be permitted to discount double-name commercial paper 
for its member banks ; certainly the terms should be equal to all. Its 
discount rate should be made public, subject to weekly or semi- 
weekly change. 

A. L. Mills, 
President First National Bank, Portland, Oreg. 



It should be allowed to discount double-name paper from its 
members on satisfactory proof of the value of same. The rate of 
discount should be made public and subject to change. 

D. N. Fink, 
President Commercial National Bank, Muskogee, Okla. 

88 



84 REPLIES RECEIVED BY THE COMMITTEE. 

Yes ; but not necessarily at the same rate per cent. 
No particular objection to advertising rate, but no strong reason 
to do so, provided it is uniform to banks in same territory. Rate 
could be changed on fresh business as often as conditions might 
suggest. 

Wm. Ingle, 
Vice President Merchants-Mechanics National Bank, 

Baltimore, Md. 

The discount rate for each section should be above the normal rate 
for that section. A uniform rate for the whole of the United States, 
in sections developed and undeveloped, is absurd. If a big bank 
could fix a uniform rate of interest for the whole country, it would 
be a monstrous monopoly. The law of supply and demand and risk 
for money must govern. 

Andrew J. Frame, 
President Waukesha National Bank, Waukesha, Wis. 



Yes; discount rate should be public, subject to change of market 
and other conditions. 

J. R. MlJLVANE, 

President Bank of Topeka, Topeka, Kans. 



To both section of this question, yes. 

James K. Lynch, 

Vice President First National Bank of San Francisco. 



There should not be any reserve associations. 

Harry B. Fish. 
Secretary Peopled Money League, Chicago, III. 



The rate of discount should be subject to change, and the members 
pay in proportion to interest rates in different localities. 

J. H. Stewart, 

Wichita, Kans. 

There should not be any reserve associations. 

Karl, F. M. Sandberg, 

Chicago. 

This question shows that it is in the minds of its promoters to do 
a large and profitable business, using largely the reserves for that 
purpose. Only those who have thrown the idea of percentage to the 
winds would favor the use of reserves in this way. 
The plan is radically unsafe. 

Theodore Gilman, 

New York. 



KEPLIES KECEIVED BY THE COMMITTEE. 85 

The central organization should discount paper bearing the in- 
dorsement of its member banks on equal terms to all. Its discount 
rates should be published and subject to change as conditions compel 
or make it advisable, but if you limit the earning power of your cen- 
tral organization to 4 per cent, which is ample, this being double what 
the banks are getting on nearly three-fourths of a billion of their 
reserve to-day, then by so limiting the earnings of this central organ- 
ization and providing for any earnings in excess of 4 per cent to 
revert to the Treasury of the United States, you do away with any 
incentive to use this central organization in a manner to exploit 
the country or any portion of it, and you provide, further, for a low 
and stable rate of discount for the entire United States. The only 
way your central organization could make earnings would be by dis- 
counting paper for the other banks, and if it can only earn 4 per cent 
this discount rate will run under normal conditions somewhere from 
2 to 3 per cent, probably nothing in excess of 3 per cent. 

J. R. Greenlees, 

Lawrence, Kans. 



No. 

SlGMUND FEUST, 

President South Bronx Property Owners'' Association, 

New York City, N. Y. 



QUESTION NO. 21. 

Should it loan directly to member banks with or without collateral 
security, and should the rate of interest be equal to all, public, and sub- 
ject to weekly change ? 

ANSWERS. 

Experience would be necessary to determine a number of details of 
management. The publication of a rate subject to change at any 
time, or weekly, might prove desirable. 

John McHugh, 
President First National Bank, Sioux City, Iowa. 



It should loan direct to member banks, through its branches, with 
collateral security. 

S. H. BURNHAM, 

President First National Bank of Lincoln, Lincoln, Nebr. 



If loans are made direct to member banks, it should be with ample 
collateral security, and the rate of interest should be equal to all 
member banks; and I see no particular objection to the rate being 
public and subject to weekly change. 

Fred H. Quincy, 
President Planters' 1 State Bank, Salina, Kans. 



Under adequate restrictions a regional reserve association should 
be permitted to loan directly to member banks upon collateral se- 
curity, and the rate of interest should be the same to all, should be 
made public, and subject to weekly or semi weekly change. 

A. L. Mills, 
President First National Bank, Portland, Oreg. 



I do not think it should loan to anyone without collateral, unless 
the paper is of such character as its worth could not be questioned, 
and that only in rare cases; and I hardly feel justified in saying the 
rate of interest should be the same to all, for it is a well-known fact 
that where a bank receives a larger rate of interest on its loans it 
could afford to pay a larger rate of interest on its rediscounts; there- 
fore it would appear reasonable and just that a sliding scale of 
interest could be made governing the size of the loan. 

D. N. Fink, 
President Commercial National Bank i Muskogee, Okla. 
86 



EEPLIES RECEIVED BY THE COMMITTEE. 87 

Yes; on direct obligations of banks secured by pledge of current 
trade paper, single or double name when rated, but not on stocks or 
bonds. A bank has no business to own either. Their present invest- 
ments in such directions are at the expense of business which properly 
should have the care of banks. To accept stocks and bonds as col- 
lateral would simply add to the demand for money to be used 
largely in speculation and exploitation. The rate of interest charged 
on loans should not be uniform the country over, but should be 
graded to operate with even effect. If in a State where legal or 
contract rate is 6 per cent, a 5 per cent rate for discount be made — 
the discount rate should be 6f per cent in territory allowing 8 per 
cent rates. 

Wm. Ingle, 
Vice President Merchants-Mechanics National Bank, 

Baltimore, 31 d. 

Loans direct to depositors not objectionable. Barring stocks, the 
management must govern the quality of the loans and collaterals 
under conservative limitations. 

Andrew J. Frame, 
President Waukesha Xational Bank, Waukesha, Wis. 



It should loan directly to member banks up to 25 per cent of their 
paid-in capital. Collateral should be required on loans in excess of 
that. 

The rate should be equal to all, but not public. 

J. R. MULVANE, 

President Bank of Topeka, Topeka, Kam. 



I should consider it inadvisable to loan directly to banks, as it 
would lead to loading the association with nonliquid and probably 
indigestible securities. Let the advances be entirely upon the dis- 
count of paper, with two or more names if possible. This restriction 
will in itself foster a discount market and improve the character of 
the investments of the banks. 

James K. Lynch, 
Vice President First National Bank of San Francisco. 



There should not be any reserve associations. 

Harry B. Fish, 
Secretary People's Money League, Chicago, III. 



Loan or issue currency directly to members subject to change in 
fixed rate and rate be in proportion to interest rates in different 
localities. 

J. H. Stewart, 

Wichita, Kans. 



88 REPLIES EECEIVED BY THE COMMITTEE. 

There should not be any reserve associations. 

Karl F. M. Sand-berg, 

Chicago. 

This is a most astonishing suggestion. It shows how easily a 
regional reserve bank might drift into unsafe practices. 

The safety of the business of the country requires this question to 
be answered in the negative. 

Theodore Gilman, 

New York. 



The central organization should deal directly through its various 
branches with its member banks and should discount short-time 
commercial paper ; or, in other words, paper such as the other banks 
loan their own money on ; but all paper presented for discount should 
be indorsed and guaranteed by the bank having it discounted, and 
there should probably be some limitation placed on the amount which 
should be discounted at any one time for any one bank. 

J. R. Greenlees, 

Lawrence, Kans. 

No. 

SlGMUND FEUST, 

President South Bronx Property Owners* Association, 

New York City, N. Y. 



QUESTION NO. 22. 

Should reserve associations be permitted to deal with each other in the 
purchase and sale of commercial paper, exchange, securities, and gold? 

ANSWERS. 

Only under authority and approval of the general supervising 
agency. 

John McHugh, 
President First National Bank, Sioux City, Iowa. 



I think reserve associations should be permitted to deal with each 
other in the purchase and sale of commercial paper, exchange, secu- 
rities, and gold. I think exchange drawn on any reserve associa- 
tion should be worth par at any association. 

Fred H. Qtjincy, 
President Planters' 9 State Bank, Salina, Kans. 



Reserve associations should be permitted to deal with one another 
in the purchase and sale of commercial paper, exchange, securities, 
and gold; the different associations should be but component parts 
of the whole financial system with ability to lend strength one to 
the other. 

A. L. Mills, 
President First National Bank, Portland, dreg. 



I can see objection as to why branch reserve associations should 
deal with each other, but there could be easily arranged a plan by 
which each could deal through the central control, thereby obtain- 
ing the same end as desired if dealing directly with each other. 

D. N. Fink, 
President Commercial National Bank, Muskogee, Okla. 



Yes. 



No. 



Wm. Ingle, 
Vice President Merchants-Mechanics National Bank, 

Baltimore, Md. 

Andrew J. Frame, 
President Waukesha National Bank, Waukesha, Wis. 

89 



90 EEPLIES RECEIVED BY THE COMMITTEE. 

Yes. Why not? 

J. E. MlJLVANE, 

President Bank of Topeka, Topeka, Kans. 



If regional associations are established and they are not permitted 
to deal with each other in the closest possible manner in every one of 
the particulars mentioned they will be worse than useless. Better 
have one association, and then this question can not arise. 

James K. Lynch, 
Vice President First National Bank of San Francisco. 



There should not be any reserve associations. 

Harry B. Fish, 

Secretary Peopled Money League, Chicago, III. 



No. Let the individual banks attend to that. 

J. H. Stewart, 

Wichita, Kans. 



There should not be any reserve associations. 

Karl F. M. Sandberg, 

Chicago. 



This develops still further the plan of those pushing the regional 
reserve banks. They would form a chain of banks across the coun- 
try, having dealings with each other, the character of which would 
be unknown to the public. Such associations should not be created 
by Congress. 

Theodore Gilman, 

New York. 



It will be a mistake to have more than one organization. 

J. R. Greenlees, 

Lawrence, Kans. 



No. 

SlGMUND FeTJST, 

President South Bronx Property Owners 1 Association, 

New York City, N. Y. 



QUESTION NO. 23. 

Should Government deposits be withdrawn from banks and placed with 
the reserve associations; and if so, how should they be apportioned and 
what rate of interest, if any, should be paid? Within what time could 
this be safely done? 

ANSWERS. 

This is a matter of detail, but they should be apportioned with the 
idea uppermost of serving the general business of the country in an 
equitable manner, and any changes from existing custom should be 
made very gradually, so that business disturbance might not result. 

John McHugh, 
President First National Bank, Sioux City, Iowa. 



The Government deposits should be withdrawn from banks and 
placed with the reserve association, with uniform rate of interest, 2 
per cent. 

S. H. Burnham, 

President First National Bank of Lincoln, Lincoln, Nebr. 



I think all Government deposits should be made with the reserve 
associations and withdrawn from individual banks and should be 
apportioned as nearly equal as possible between the various associa- 
tions, and, as heretofore stated, I do not think the association should 
be permitted to pay interest on any deposit, Government or bank, 
but if so the rates should not exceed 2 per cent under any circum- 
stances. As to the time necessary to accomplish this change, I think 
it could be safely done within six months. 

Fred H. Qtjincy, 
President Planters'' State Bank, Salina, Kans. 



Government deposits should be withdrawn from national banks 
and placed with reserve associations. Such deposits should be dis- 
tributed in proportion to the capital of the several reserve associa- 
tions. No rate of interest should be paid. A reasonable length of 
time should be granted for such transfer of Government deposits, 
distributed, say, over a period of two years. 

A. L. Mills, 
President First National Bank, Portland, Oreg. 

91 



92 REPLIES RECEIVED BY THE COMMITTEE. 

I can see no good reason why Government deposits should be with- 
drawn from its membership and placed with the central control at 
one time. Perhaps it would be a good idea to withdraw the funds 
at least down to the minimum. 

D. N. Fink, 
President Commercial National Bank, Muskogee, Okla. 



Yes; but apportionment would depend upon nature of basic plan. 
Present Government deposits could probably be withdrawn safely 
in a year or less. 

Wm. Ingle, 
Vice President Merchants-Mechanics National Bank, 

Baltimore, Md. 



If new reserve organizations are developed, then Government de- 
posits might go to them, but if the clearing houses are char- 
tered, to cover our requirements, then the existing arrangement can 
not well be changed. 

Andrew J. Frame, 
President Waukesha National Bank, Waukesha, Wis. 



Yes. The interest rate should not be over 2 per cent, 

J. E. MlJLVANE, 

President Bank of Topeka, Topeka, Kans. 



The Government deposits should all be placed in the reserve asso- 
ciations, arid should be free of interest. The Government should 
have a share of profits in lieu of interest. 

James K. Lynch, 

Vice President First National Bank of San Francisco. 



Yes; Government deposits should be withdrawn from the private 
banks. They should never have been deposited in them. No; they 
should not be placed with reserve associations, but kept in the Gov- 
ernment's own depositories, the treasuries and postal banks. 

This could safely be done at any time, the funds being used to 
reclaim our natural resources, take over our public utilities, or to 
institute new public works. 

Harry B. Fish, 
Secretary Peopled Money League, Chicago, III. 



No. Let individual banks deal with the Government, because the 
big majority of b*anks will have no Government deposit. 

J. H. Stewart, 



Wichita, Kans. 



KEPLIES RECEIVED BY THE COMMITTEE. 93 

Yes; Government deposits should be withdrawn from the private 
banks. They should never have been deposited in them. No; they 
should not be placed with reserve associations, but kept in the Gov- 
ernment's own depositories, the treasuries and postal banks. 

This could safely be done at any time, the funds being used to 
reclaim our natural resources, take over our public utilities, or to 
institute new public works. 

Karl F. M. Sandberg, 

Chicago. 

It would create financial disturbance to transfer Government de- 
posits from one set of banks to another. The proposal shows that 
the advocates of regional reserve banks want " all there is in it." 
This is no small scheme. It proposes to take everything in sight. 
The scheme should not be allowed. 

Theodore Gilman, 

New York. 



Government deposits should be withdrawn from the local banks, 
and all Government funds carried in the central organization, and 
disbursements and collections for the Government should be made 
through this organization with its branches. These deposits could 
not be withdrawn until you perfect your new organization and pro- 
vide a place where the banks can secure accommodations ; this could 
be done within a very short time after the organization was per- 
fected. 

J. R. Greenlees, 

Lawrence, Kans. 

No. 

SlGMUND FEUST, 

President South Bronx Property Owners' 1 Association, 

New York City, N. Y. 



CtUESTION NO. 24. 

Should every national bank be required to keep its reserve with the 
association to which it belongs except such as it keeps in its own vaults; 
or should it be permitted to keep any certain per cent of its reserve with 
other reserve associations ? If so, how much ? 

ANSWERS. 

Such reserve as a bank might keep with a district reserve bank 
should be with the reserve bank of its own district and with no 
other. 

John McHugh, 
President First National Bank, Sioux City, Iowa. 



National banks should not be compelled to keep their reserve with 
the association. They should be permitted to keep a portion of it, 'at 
least, with other reserve associations in the event there are several. 

S. H. BURNHAM, 

President First National Bank of Lincoln, Lincoln, Nebr. 



I think every bank, National or State, a member of the association 
should be required to keep its legal reserve with the association, 
except such as it keeps in its own vaults, providing, of course, that 
exchange is kept at par between the various associations. 

Feed H. Quincy, 
President Planters'' State Bank, Salina, Hans. 



A national bank should be permitted to keep a certain per cent of 
its reserves with any reserve association, say, at least, 5 per cent. As 
the business of the country requires the principal foreign balances 
to be kept in the large centers, such as Chicago and New York, the 
national banks of the country should be permitted to keep their 
reserve in such cities in order that they can transact business to the 
best advantage. 

- A. L. Mills, 
President First National Bank, Portland, Or eg. 

94 



KEPLIES RECEIVED BY THE COMMITTEE. 95 

Each member should be required to keep his reserve with the bank 
in his territory unless it could be shown that it was a great incon- 
venience to do so, then he should be allowed to keep it in one that 
serves his territory best. 

D. N. Fink, 
President Commercial National Bank, Muskogee, Okla. 



Under proper law a reserve of 15 per cent (in vault and half with 
one reserve) should be ample. The proportion might be changed in 
the case of rural banks. 

Wm. Ingle, 
Vice President Merchants-Mechanics National Bank, 

Baltimore, Md. 



Except as indicated in No. 5. The reserves should not be disturbed. 
Country banks must keep deposits in central banks, and they with 
the great centers for their own convenience to cover daily, ordinary 
needs, and no law to prevent it will ever stand a practical test. 
Banks, individuals, and even Governments have idle money occa- 
sionally, and money rates will fluctuate in any progressive nation. 
To keep an even keel at all times is, alas, beyond the power of man. 

Andrew J. Frame, 
President Waukesha National Bank, Waukesha, Wis. 



Every bank should keep its principal account with its own associa- 
tion ; the balance with New York, Chicago, St. Louis, etc. Our head- 
quarters would be Kansas City for this territory. 

J. R. MULVANE, 

President Bank of Topeka, Topeka, Kans. 



(1) Aside from the amount of coin reserve which it may be re- 
quired that each bank should keep in its vaults banks should be 
permitted to count as reserve balances with any branch of the reserve 
association or associations. 

(2) Limitations are difficult to fix intelligently and are always 
dangerous. 

James K. Lynch, 
Vice President First National Bank of San Francisco. 



A bank's reserve should be kept with the Government. 

Harry B. Fish, 
Secretary People's Money League, Chicago, III. 



No. Let the reserve be handled as it now is. 

J. H. Stewart, 

Wichita, Kans. 

3056—18 7 



96 REPLIES RECEIVED BY THE COMMITTEE. 

A bank's reserve should be kept with the Government. 

Karl F. M. Sandberg, 

Chicago. 

Keeping all its reserve with its regional reserve bank would be 
unsafe, and to distribute its reserve is inconsistent with the idea of 
the promoters. 

Theodore Gilman, 

New York. 



Every bank should be compelled to keep its reserve with the cen- 
tral organization, except such as it keeps in its own vault. No bank 
should be allowed to pay interest on deposits of another bank under 
any circumstances. 

J. R. Greenlees, 

Lawrence, Kans. 

No. 

SlGMUND FEUST, 

President South Bronx Property Owners^ Association, 

New York City, N. Y. 



QUESTION NO. 25. 

Should a reserve association be required to maintain a reserve against 
its deposits, and, if so, in what amount, and should it consist of gold only 
or lawful money ? 

ANSWERS. 

The district reserve bank should be required to maintain at least a 
25 per cent reserve against its deposits, and that reserve should con- 
sist of gold only. 

John McHttgh, 

President First National Bank, Sioux City, Iowa, 



It should be required to maintain a reserve against its deposits of 
35 to 50 per cent, and should consist of a certain per cent of gold 
and lawful money. 

-S. H. Buknham, 
President First National Bank of Lincoln, Lincoln, Nebr. 



I think the reserve associations should be required to maintain a 
reasonable reserve in gold against its deposits and currency. As to 
just what amount I am unable to express an opinion. 

I Fred H. Quincy, 

President Planters* State Bank, Salina, Kans. 



If a reserve association be required to maintain a 25 per cent re- 
serve against its circulation, in addition thereto it should maintain 
a reserve of at least 25 per cent against its deposits. Of this reserve 
against deposits a certain percentage, say, 15 per cent, should be gold 
and the balance might be lawful money. 

A. L. Mills, 
President First National Bank, Portland, Or'eg. 



I am not prepared to answer this question other than to state a 
reasonable reserve would be best. However, central control bank 
would govern those things absolutely. 

D. N". Fink, 
President Commercial National Bank, Muskogee, Okla. 

97 



98 REPLIES RECEIVED BY THE COMMITTEE. 

Yes ; probably 25 per cent in gold only. 

Wm. Ingle, 
Vice President Merchants-Mechanics National Bank, 

Baltimore, Md. 



Reserve associations should hold only gold or gold certificates for 
reserves as against bank deposits, as indicated in No. 5. As a sec- 
ondary relief measure, see No. 6. On these little or no reserves are 
necessary, as such issues are for temporary purposes only. 

Andrew J. Frame, 
President Waukesha National Bank, Waukesha, Wis, 



No. 



J. R. MlJLVANE, 

President Bank of Topeka, Topeka, Kans. 



Reserve associations should be required to keep a gold reserve 
against their deposits as well as against their circulating notes. 
Under the scheme, which to me seems the only one possible, the term 
" lawful money " would have no meaning and would disappear with 
the retirement of the legal tenders. 

James K. Lynch, 
Vice President The First National Bank of San Francisco. 



There should be no reserve associations. 

Harry B. Fish, 
Secretary People's Money League, Chicago, III. 



No reserve. 

J. H. Stewart, 

Wichita. Kans. 



There should not be any reserve associations. 

Karl F. M. Sandberg, 

Chicago. 

This question shows how little importance is attached in the minds 
of the promoters to the safe custody of reserves. The national-bank 
act prescribes the amount of reserves to be kept by different classes of 
banks, and any different rule must be in the direction of an impair- 
ment or weakening of reserves. 

The present provisions of the national-bank act should not be 
changed. 

Theodore Gilman, 

New York. 



KEPLIES RECEIVED BY THE COMMITTEE. 99 

Our present laws requiring the tying up of nearly 50 per cent of 
all the money in the United States as legal reserve should be replaced, 
and your central organization should carry ample reserve against its 
note issues and deposits. As it would be charged with maintaining 
the gold reserve for the country, it would naturally carry it in gold. 
A credit to any bank in this organization would be counted the same 
as gold, just as a credit to-day in the Bank of England would be 
counted gold for one of the other banks, because the Bank of England 
always redeems its notes in gold. 

J. K. Greenlees, 

Lawrence, Kans. 



No. 



SlGMTJND FEUST, 



President South Bronx Property Owners^ Association, 

New York City, N. Y. 



QUESTION NO. 26. 

Should the liability of each member bank in a reserve association be 
limited to its stock subscription ? If not, what should be the liability ? 

ANSWERS. 

The liability of each member bank in a district reserve bank should 
be limited to the amount of its stock subscription. 

John McHugh, 
President First National Bank, Sioux City, Iowa. 



The liability of each member bank in the association should be 
limited absolutely to its stock subscription. Otherwise it would be 
an indefinite liability that would involve its security to its other 
creditors and depositors. A member bank should be permitted to 
carry this stock as a part of its surplus, and in no case should be 
permitted to take it out of its capital. 

Feed H. Quincy, 
President Planters^ State Bank, Salina, Kans. 



The liability of each member bank in the regional reserve associa- 
tion should be limited to its stock subscription. As it is but a bank of 
banks with its note issues adequately protected by a gold reserve 
and its deposit liability confined to the Government and its members, 
there should not be an additional liability imposed on the member 
banks simply for the further protection of the Government deposits. 

A. L. Mills, 
President First National Bank, PorUand, Oreg. 



Yes. 

D. N. Fink, 
President Commercial National Bank, Muskogee, Okla. 



Yes; unless detail of law would suggest wisdom of assuming 
greater responsibility. 

Wm. Ingle, 
Vice President Merchants-Mechanics National Bank, 

Baltimore, Md. 

100 



REPLIES RECEIVED BY THE COMMITTEE. 101 

Limit to stock subscriptions, if corporation organized, as no bank 
would take it otherwise. 

Andrew J. Frame. 
President Waukesha National Bank, Waukesha, Wis. 



Limited to the amount of its stock subscription. 

J. E. MtnLVANE, 

President Bank of Topeka, Topeka, Kans. 



While not fully prepared to answer this question, it appears to me 
that the liability to each member bank should be limited to its stock 
subscription. 

James K. Lynch, 
Vice President First National Bank of San Francisco. 



There should be no reserve associations. 

Harry B. Fish, 
Secretary Peopled Money League, Chicago, III. 



Its secondary liability should be in proportion to its stock in the 
association, but each member should be fully liable for all currency 
issued to it. 

J. H. Stewart, 

Wichita, Kans. 

There should not be any reserve associations. 

Karl F. M. Sandberg, 

Chicago. 

This question shows the advantage clearing houses have over 
regional reserve associations. 

Without a stock subscription the members of a clearing house 
guarantee its obligations, and they are very careful what those 
obligations are. There have been no cases of trouble with clearing 
houses. A regional reserve bank might easily get into trouble. The 
plan is not desirable. 

Theodore Gilman, 

New York. 



Each individual member would be liable for all paper discounted 
by it. 

J. R. Greenlees, 

Lawrence Kans. 



No. 

Sigmund Feust, 
President South Bronx Property Owners'* Association, 

New York City, N. Y. 



dUESTION NO. 27. 

Should a reserve association have transactions with banks other than 
its own members; and if so, what character of transactions should be 
permissible ? 

ANSWERS. 

If a district reserve bank had a surplus of funds and one or more 
other district reserve banks were in need of funds, it should be within 
the discretion of the general supervising agency to determine whether 
such surplus of funds could be loaned, payable on demand, to such 
reserve bank or banks as might be in need of funds. 

John McHugh, 
President First National Bank, Sioux City, Iowa. 



The reserve association should not be permitted to have trans- 
actions with banks other than its own members. 

S. H. BURNHAM, 

President First National Bank of Lincoln, Lincoln, Nebr. 



I do not think a reserve association should have any transactions 
with banks other than its own members. 

Fred H. Quincy, 
President Planters' 1 State Bank, Salina, Kans. 



A reserve association should not be permitted to have transactions 
with banks other than its own members, since membership is open 
to all banks in the territory, provided all alike submit to the same 
regulations. It is not proper that a bank not a member should 
have the benefits to be derived from the association without the 
responsibilities and liabilities. 

A. L. Mills, 
President First National Bank, Portland, Oreg. 



Yes ; to the extent of loaning its surplus funds on first-class security 
and of liquid form. 

D. N. Fink, 
President Commercial National Bank, Muskogee, Okla. 
102 



KEPLIES RECEIVED BY THE COMMITTEE. 103 

None; excepting only with central reserve other branches. 

Wm. Ingle, 
Vice President Merchants-Mechanics National Bank,, 

Baltimore, Md. 

No. 

Andrew J. Frame, 

President Waukesha National Bank, Waukesha, Wis. 



No. 

J. R. MlJLVANE, 

President Bank of Topeka, Topeka, Kane. 



Don't attempt to make artificial barriers between the reserve asso- 
ciations. It would only be an attempt to build a Chinese wall around 
geographical districts very hard to definitely locate. Better stick 
to the central association with branches, and this question will not 
arise. 

James K. Lynch, 
Vice President First National Bank of San Francisco. 



There should be no reserve associations. 

Harry B. Fish, 

Secretary Peopled Money League, Chicago, III. 



No. 

J. H. Stewart, 

Wichita, Kans. 

There should not be any reserve associations. 

Karl F. M. Sandberg, 

Chicago. 

Evidently these regional reserve associations are intended to do a 
general business all over the country. All these questions show the 
dangers of the scheme. They would certainly establish a money 
trust of the most powerful description. 

Theodore Gilman, 



Included in foregoing answer. 



New York. 



J. R. Greenlees, 

Lawrence, Kans. 



No. 



SlGMUND FEUST, 

President South Bronx Property Owners' 1 Association, 

New York City, N. Y. 



QUESTION NO. 28. 

Should national banks be permitted, upon payment of a commission, to 
loan their credit by accepting bills arising out of the ordinary course of 
commerce, and should reserve associations be permitted to deal in these 
acceptances in transactions with banks or other reserve associations ? 

ANSWERS. 

Yes. Banks should be permitted to execute acceptances when 
properly authorized to do so by responsible customers requesting it. 
Such acceptances ought to be just as available with the district re- 
serve bank for credit or currency as commercial paper, if not more so. 

John McHugh, 
President First National Bank, Sioux City, Iowa. 



National banks should be permitted to loan their credit by accept- 
ing bills arising out of strictly commercial transactions to a certain 
extent. This, however, should be limited. 

S. H. BURNHAM, 

President First National Bank of Lincoln, Lincoln, Neb'r. 



I think all banks, members of any association, whether State or 
National, should be permitted to deal in credit by accepting bills aris- 
ing out of ordinary course of commerce, and reserve associations 
should be permitted to deal in these acceptances in transactions with 
other associations under reasonable restrictions. 

Fred H. Quincy, 
President Planters^ State Bank, Salina, Kans. 



National banks should be permitted, upon payment of commission, 
to loan their credit by accepting bills arising out of the ordinary 
course of commerce, and reserve associations should be permitted to 
deal in such acceptances; otherwise one of the benefits to be derived 
from the reform of the currency is lacking. 

A. L. Mills, 
President First National Bank, Portland, Oreg. 

104 



KEPLIES KECEIVED BY THE COMMITTEE. 105 

Yes; on the approval of the central control bank's board of 
directors passing on its transactions. 

D. N. Fink, 

President Commercial National Bank, Muskogee, Okla. 



| Yes ; provided always that no bank should be permitted to assume 
liability of any kind either for deposits, circulation, rediscounts, 
bills payable, or acceptances beyond an amount which shall be such 
multiple of capital stock as law might name. 

Wm. Ingle, 
Vice President Merchants -Mechanics National Bank, 

Baltimore, Md. 



A dangerous fallacy. With a bank credit expansion of nine times 
capital now; with three-fourths of loans in bonds, mortgages, and 
slow paper; with the other one-fourth covering all live paper extant 
and always absorbed by banks first, why should banks generally be 
allowed to pyramid credit on credit? Acceptances should be con- 
fined to acceptance or discount houses making it a business and not 
to banks of deposit. 

The necessity for additional opportunities for rediscounts is mani- 
festly absurd, because out of $18,500,000,000 of loans, discounts, etc., 
the total rediscounts and money borrowed by all banks from banks 
averages the insignificant sum of $150,000,000, or less than 1 per 
cent of the whole. The present city reserve banks are open at all 
times (except in panic periods, which is the only trouble to solve) 
for far larger rediscounts if needed. 

Andreav J. Frame, 
President Waukesha National Bank, Waukesha, Wis. 



Do not permit national banks to accept bills, except such as shall 
represent merchandise actually in transit or represented by mer- 
chandise covered by negotiable warehouse receipts. 

Robert D. Kent, 

President Merchants Bank of Passaic, Passaic, A 7 . J. 



All banks should be treated alike. The reserve associations should 
not be permitted to deal in acceptances. Acceptances are a broker's 
business. 

J. R. MuLVANE, 

President Bank of Topeka, Topeka, Kans. 



National banks should be permitted upon receipt (not payment of 
a commission) to loan their credit by accepting bills arising out of 
the ordinary course of commerce. Most emphatically reserve asso- 
ciations should deal in such acceptances. 

James K. Lynch, 
Vice President First National Bank of San Francisco. 



106 EEPLIES EECEIVED BY THE COMMITTEE. 

No. Neither national nor other banks should be permitted to 
loan their " credit," nor should reserve associations be permitted to 
deal in acceptances. All such transactions mean the substitution 
of some other mediums for Government money and must be classed 
and should be treated as counterfeiting. The Government has the 
full ability as well as the monopoly of furnishing all mediums of 
exchange needed and should promptly and unhesitatingly do so for 
the good of us all. 

Harry B. Fish, 
Secretary People's Money League, Chicago, III. 



No. 

J. H. Stewart, 

Wichita, Kans. 

No; neither national nor other banks should be permitted to loan 
their " credit," nor should reserve associations be permitted to deal 
in acceptances. All such transactions mean the substitution of some 
other medium for Government money and must be classed and should 
be treated as counterfeiting. The Government has the full ability 
as well as the monopoly of furnishing all mediums of exchange 
needed and should promptly and unhesitatingly do so for the good 
of us all. 

Karl F. M. Sandberg, 

Chicago. 

This is another indication of the desire to revolutionize the banking 
methods of this country and introduce foreign customs, all in the 
direction of making the business of regional banks more general. 
It may be that the proposed change is desirable, but it is not a neces- 
sary part of banking reform and should not cumber the new bill. 

Theodore Gilman,, 

New York. 



Our banks should be permitted to accept bills arising out of the 
ordinary course of commerce, and the banks of the country should 
be authorized to deal in such bills. Your central organization 
should have authority to buy such bills. 

J. K. Greenlees, 

Lawrence, Kans. 

Such a measure alone (pt. 1 of the question) might or may be 
one of the greatest blessings and best progressive measures ever 
thought of and place the country's working, industrial, and other 
forces on the lasting road to prosperity, but its consequences might 
be disastrous. I can only compare it with an insurance which pays 
out the whole amount of the loss at once on receipt of the premium ; 
but properly restricted by law, in regard to the security to be given 
to the purchaser of the guaranty or credit, it may be of great benefit. 

Sigmund Feust, 
President South Bronx Property Owners' Association, 

New York City, N. Y. 



QUESTION NO. 29. 

Should there be a limit within which banks should be permitted to 
give acceptances? If so, what limit? 

ANSWERS. 

Such acceptances should not run longer than 90 days, preferably 
30 to 60 days. 

John McHugh, 

President First National Bank, Sioux City, Iowa. 



I think there should be a limit to which banks might give accept- 
ances, but would not like to suggest what that limit should be. 

Fred H. Quincy, 

President Planters' State Bank, Salina, Kans. 



Banks should be limited in their power to give acceptances. Such 
limitation should be practically that now granted to national banks 
in the matter of loans; in other words, they should not accept drafts 
of one maker in greater amount than 10 per cent of their capital and 
surplus. The total amount of such outstanding acceptances at any 
one time should not exceed the capital of the bank. 

A. L. Mills, 
President First National Bank, Portland, Or eg. 



Yes. Not to exceed its capital. 

D. N. Fink, 
President Commercial National Bank, Muskogee, Okla. 



A bank without deposits would hardly have any excuse for exist- 
ing. To permit such a bank to only use its capital as the means of 
borrowing money from a reserve association would be poor policy. 
It might, therefore, be wise to limit outstanding acceptances to some 
fraction of deposit line proposed, say 10 per cent. 

Wm. Ingle, 
Vice President Merchants -Mechanics National Bank, 

Baltimore, Md. 
107 



108 KEPLIES KECEIVED BY THE COMMITTEE. 

See No. 28. 

Andrew J. Frame, 
President 'Waukesha National Bank, Waukesha, Wis. 



Acceptances should be strictly limited in total amount to, say, 25 
per cent of capital and surplus. 

Robert D. Kent, 

President Merchants Bank of Passaic, Passaic, N. J. 



The practice should not be permitted. 

J. R. MuLVANE, 

President Bank of Topeka, Topeka, Kans. 



It is probable that the permission to accept drafts should be con- 
fined to banks with a certain minimum capitalization. Without hav- 
ing given extended consideration to this question, I would put the 
limit at $1,000,000. 

James K. Lynch, 
Vice President First National Bank of San Francisco. 



Banks should not be permitted to give acceptances. If there is any 
need of acceptances they can be handled by the Government. 

Harry B. Fish, 
Secretary Peopled Money League, Chicago, III. 



As I understand the matter I would not have any acceptances at 
all. 

J. H. Stewart, 

Wichita, Kans. 



Banks should not be permitted to give acceptances. If there is 
any need of acceptances they can be handled by the Government. 

KXrl F. M. Sandberg, 

Chicago, III. 

The trend of these questions indicates that they are inspired by 
bank officers familiar with English or Canadian banking, and this 
country can no doubt learn much from those sources. 

But the present is not the time to take up discussions on subordi- 
nate points. They had better come later. 

Theodore Gilman, 

New York, N. Y. 



KEPLIES KECEIVED BY THE COMMITTEE. 109 

Your central organization should not be allowed to earn more than 
4 per cent. All other earnings above that amount should revert to 
the Government, and be placed to the credit of the Treasury of the 
United States. 

J. R. Greenlees, 

Lawrence, Kans. 



Yes ; in proportion to their capital and assets. 

Sigmund Feust, 

President South Bronx Property Owners' 1 Association, 

New York City, N. Y. 






QUESTION NO. 30. 

What dividends should reserve associations be permitted to pay their 
member banks? 

ANSWER. 

They should be permitted to pay 5 per cent, or possibly 6 per cent, 
according to the earning power of money in the district, and pro- 
viding the dividends were earned, and providing, too, that a proper 
amount was first carried to surplus account. 

John McHtjgh, 
President First National Bank, Sioux City, Iowa. 



Dividends should be allowed to 5 or 6 per cent. 

S. H. BUENHAM, 

President First National Bank of Lincoln, Lincoln, Nebr. 



Reserve associations should be permitted to pay their member 
banks, I should say, 5 per cent dividends on stock held by them, and 
all their earnings above 5 per cent should be placed in surplus until 
the surplus of the association should equal half its capital, after 
which a dividend should be paid to the extent of its earnings after 
all reasonable deductions and expenses are paid. 

Fred H. Quincy, 
President Planters State Bank, Salina, Kans. 



Reserve associations should be permitted to pay their members 
dividends not to exceed 6 per cent after a 20 per cent surplus has 
been accumulated. Earnings in excess of 6 per cent should be di- 
vided equally between the Government and the member banks. 

A. L. Mills, 
President First National Bank, Portland, Oreg. 



Eight per cent, and if, after setting aside a reasonable reserve for 
contingencies, the earnings are greater than 8 per cent, the discount 
should be reduced. 

D. N. Fink, 
President Commercial National Bank, Muskogee, Okla. 

110 



REPLIES EECEIVED BY THE COMMITTEE. Ill 

Probably 5 per cent, with possibly additional in equalization 
should discount rates be graded to meet different legal -interest rates 

in different States. 

Wm. Ingle, 

Vice President Merchants-Mechanics National Bank, 

Baltimore, Md. 



If banks provide the funds, profits should go to them. 

Andrew J. Frame. 
President Waukesha National Bank, Waukesha, Wis. 



If interest on deposits is paid, dividends of one-half of net earn- 
ings could be permitted and the other half applied to create a surplus 
until the surplus equals the capital. Thereafter the association could 
pay dividends at its discretion. 

J. R. MuLVAXE. 

President Bank of Topeka, Topeka, Kans. 



Five per cent until a proper reserve had been accumulated: after- 
wards 6 per cent. 

James K. Lynch. 
Vice President First National Bank of San Francisco. 



Reserve associations should not be permitted to exist, let alone 
paying dividends. 

Harry B. Fish, 

Secretary People's Money League. Chicago, III. 



Earnings up to 6 per cent. Above that be held as surplus for possi- 
ble losses. 

J. H. Stewart. 

Wichita, Kans. 

Reserve associations should not be permitted to exist, let alone 
paying dividends. 

Karl F. M. Sandberg, 

Chicago. 



The dividends are not important and can be restricted to a small 
percentage. The real advantage to the promoters of regional banks 
would be in the control of the business of the country thus obtained. 
That would be so profitable that the dividends could be fixed at a 
low figure, say, 4 per cent per annum, and the scheme still be a 
money maker. 

Theodore Gilman, 

New York. 

3056—13 S 



112 EEPLIES KECEIVED BY THE COMMITTEE. 

None. Banks owning stock in the central organization should re- 
ceive their dividends on this stock, and no inducement should be 
given in the way of interest to carry a larger deposit than is re- 
quired for their reserve. 

J. R. Greenlees, 

Lawrence, Kans. 



None ; there should not be any reserve associations. 

SlGMUND FEUST, 

President South Bronx Property Owners? Association, 

New York City, N. Y. 



QUESTION NO. 31. 

Should any share of the profits of a reserve association be distributed 
to the member banks in proportion to the average deposit maintained by 
them during the year ? 

ANSWERS. 

No attention should be paid to the amount of deposit maintained 
when considering the distribution of the earnings of the district 
reserve bank. Dividends should be paid upon shares regardless of 
the deposit maintained by the individual bank with the district 
reserve bank. 

John McHugh, 
President First National Bank, Sioux City, Iowa. 



Profits of a reserve association should not be distributed according 
to the average deposit maintained. 

S. H. Burnham, 
President First National Bank of Lincoln, Lincoln, Nebr. 



Dividends or profits should not be paid to the member banks of any 
association based on deposits. It should be based on their stock 
holdings the same as in any other business institution. 

Fred H. Quincy, 



President Planters' 1 State Bank, Salina, Kans. 



The average deposit maintained by member banks with the reserve 
association should not be considered in the distribution of profits. 

A. L. Mills, 

President First National Bank, Portland, Oreg. 



Yes. 

D. N. Fink, 
President Commercial National Bank, Muskogee, Okla. 



If no interest on deposits in reserve banks be paid then surplus 
profits, if any after payment of dividend, charges, etc., as see answer 
to query No. 19. 

Wm. Ingle, 
Vice President Merchants-Mechanics National Bank, 

Baltimore, Md. 
113 



114 EEPLIES RECEIVED BY THE COMMITTEE. 

No; as interest would be allowed on deposits the average deposit 
maintained by a member bank should not affect the dividend paid 
to that member. 

J. R. MlTLVANE, 

President Bank of Topeka, Topeka, Kans. 



There are certainly some advantages in distributing a part of the 
profits in proportion to the average balances maintained, although 
I believe it will be found easier to adjust this matter by paying a 
moderate rate of interest on balances, and then making the dividend 
alike for all. 

James K. Lynch, 
Vice President First National Bank of San Francisco. 



The banks have proved themselves fully able to look after their 
profits without the aid of the Government. 

Harry B. Fish, 

Secretary Peopled Money League, Chicago, III. 



I think deposits will be made for convenience only. 

J. H. Stewart, 

Wich ita, Kans. 



The banks have proved themselves fully able to look after their 
profits without the aid of the Government. 

Karl F. M. Sandberg, 

Chicago. 

Participation accounts are a good device with some companies, and 
if Congress should establish reserve associations this comparatively 
harmless feature could with propriety be incorporated in the scheme. 

Theodore Gilman, 

New York. 

No share of the profits should be distributed to the members except 
the fixed earnings on their proportion of the stock of the central 
organization, which should not be allowed to exceed 4 per cent. 
All earnings in excess of this amount should revert to the Treasury 
of the United States, making of the central organization a protec- 
tion to the individual banks, and through them to the people of the 
country, not a money-making concern. 

J. R. Greenlees, 

Lawrence, Kans. 



Same answer. 

Sigmund Feust, 
President South Bronx Property Owners^ Association, 

New York City. 



QUESTION NO. S2. 

Are you familiar with the recommendations of the National Mone- 
tary Commission made to Congress in January, 1912? If so, what 
is your opinion of the plan, and what modifications would you sug- 
gest, if any ? 

ANSWER. 

Yes. Such changes and modifications as are set forth in foregoing 
answers. 

If a banking and financial system be provided along proper lines 
it will so facilitate the handling of the business of the country as to 
prevent panics, and therefore in turn make impossible a great de- 
struction of values experienced heretofore. It will render far greater 
service to the business and laboring people of this country than it 
will to banks and bankers, the banks only being the medium through 
which the business is transacted. 

John McHugh, 
President First National Bank, Sioux City, Iowa. 



I think highly of the recommendations of the National Monetary 
Commission made to Congress January, 1912. 

I favor it because it provides for one central organization without 
power to do any general banking ; it provides for 15 branches located 
in various sections of the country; it provides for centralization of 
our reserve, with power to issue currency under careful regulations ; 
and provides in its board of directors for not only experienced bank- 
ers, but a certain representation from the business world, and also 
a fair representation of Government officials. 

S. H. BlIRNHAM, 

President First National Bank of Lincoln, Lincoln, Neor. 



I have read a great deal of the recommendations of the National 
Monetary Commission made to Congress in January, 1912, and there 
are many things in these recommendations that I think are sound 
and should be considered in any system adopted. However, I do not 
agree with many of the suggestions made. It is too large a subject 
to criticize in a letter of this kind. 

Fred H. Quincy, 
President Planters^ State Bank, Salina, Kans. 

115 



116 REPLIES RECEIVED BY THE COMMITTEE. 

I am somewhat familiar with the recommendations of the National 
Monetary Commission made to Congress in January, 1912, and heart- 
ily approve the plan it proposed for banking and currency reform. 
The modifications I might suggest to the plan are of minor impor- 
tance. 

A. L. Mills, 
President First National Bank, Portland, Oreg. 



The recommendations of the National Monetary Commission most 
ingeniously and fairly deal with an involved problem, which can 
not possibly be solved in all of its relations in a single act and at 
one moment. A central bank with regional offices is not only ideal, 
but more practical than any substitute involving sacrifice to essential 
principles. 

Wm. Ingle, 
Vice President Merchants -Mechanics National Bank, 

Baltimore, Md. 



I am. The plan is the entering wedge to a monopolistic bank 
similar to what Andrew Jackson throttled in 1836. Its provisions 
for acceptances and easy methods of expanding our currency, sound 
political economy clearly indicates, spells overexpansion of currency 
and credit, a disease from which the whole world is now suffering. 
To add fuel to this fire is to press on more steam and meet with 
financial Titanic disaster. 

The only thing we need is to mobilize a part of our present gen- 
erous cash reserves, to the end that this impounded cash will put out 
an incipient fire in any section of the country, and so penalized that 
it will immediately retire again. That is true flexibility. 

Second. To have a secondary reservoir of cash for use if the first 
is unable to cope with a seriously strained situation. See No. 6. 
Not a master or money-making proposition, but for relief in trouble 
of the best and most democratic banking system in its general func- 
tions that the world has ever known. 

I believe in a central bank without general branches and with 
these limited powers; but if that is not possible, then give us such 
relief through the great clearing houses as outlined and the palsying 
effects of a general cash suspension by banks will be a nightmare to 
us no longer, practically without expense, monopoly, inflation of 
credit or currency. With this accomplished, the most democratic 
banking system on earth would be preserved and relief would always 
be at hand. 

Andrew J. Frame, 
President Waukesha National Bank, Waukesha, Wis. 



The principal objection to the plan of the National Monetary Com- 
mission was that it would lead to overexpension. (See communication 
in New York Evening Post, Jan. 16, 1912, attached.) Another 
objection, a minor one however, is that there were too many branches 



REPLIES RECEIVED BY THE COMMITTEE. 117 

provided for. Seven or eight would be sufficient. To illustrate. It 
was intended to have one at Boston. As nearly every part of New 
England can be reached by express in one day from New York a 
branch in Boston would be entirely unnecessary. All points in ex- 
treme north or east New England could be fully supplied by the 
reserve banks in Albany or Boston. Nothing should be done to dis- 
turb the relations now existing between the national banks and their 
present reserve agencies. If the reserve banks can obtain needed cur- 
rency, they can readily supply their regular correspondents with all 
that may be needed. 

In a communication to the New York Evening Post, January 16, 
1912, with reference to the danger of overexpansion in Aldrich plan, 
the writer stated : 

Sir : Your colvmms have repeatedly sounded a note of warning against the 
prospect of overexpansion from the workings of the Aldrich plan of monetary 
reform in its present form. The writer, as a delegate to the convention of the 
American Bankers' Association recently held in New Orleans, from the floor of 
the convention asked Senator Aldrich what provisions there were to prevent 
excessive expansion. The Senator replied at considerable length, but frankly 
admitted that there was no special provision and stated in effect that he 
thought the good faith and good sense of the management and of the business 
public could be depended upon to avoid such a result. 

My own opinion, based upon a banking experience of 37 years, is that there is 
great danger in the direction indicated. At present our credit can not. expand 
as it should each fall to enable us to finance our vast crops. We need, say, 
$200,000,000 or $300,000,000 more than our present supply of money for a period 
of about three months each year. This means that all the rest of the year we 
have to carry on our business, knowing that we will later on have to pass 
through that tight time. Two or three links in a chain determine the strength 
of the chain. 

In contrast to our present annual pressure for money and credit, we. under 
the proposed plan, can obtain what amounts to almost unlimited credit. This 
will be the result of several methods of expansion. First, the banks of the 
country can obtain large lines of rediscount. Second, they can. in addition to 
this, give their customers extra accommodation by pledging their credit in fur- 
nishing acceptances. Third, the balances in the possession of the reserve asso- 
ciation can be counted as reserve for the individual banks. And not only that, 
but the notes of the association, in the possession of the banks, can also be 
counted as reserve by them. These last provisions will release hundreds of 
millions of dollars of legal money now required as reserve and permit it to go 
into general use. In going to these radical provisions for expansion from our 
present position, are we not going from one extreme to another, particularly so 
in view of the fact that the tendency of a large proportion of us is to overwork 
a good opportunity? 

The writer would suggest that for a few years it would be better to limit our 
policy of expansion first to the matter of extending the opportunity for redis- 
counts, and, second, to permit the balances due from the reserve association to 
count as reserve. If after such time it was found that we used our new powers 
wisely and more expansion of credit seemed required, the other features could 
then be added. 

The point I make is of sufficient importance to have it considered by the most 
able bankers and political economists that can be found. I should like to have 
the views of Paul M. Warburg, James B. Forgan, and Prof. Seligman, of Colum- 
bia University, on the subject. 

Eobert D. Kent, 

President Merchants Bank of Passaic, Passaic, N. J. 



Yes. The plan was, on the whole, an excellent one, having, however, 
number of defects which would probably have been made evident 



118 REPLIES RECEIVED BY THE COMMITTEE. 

in practice, and which could have been eliminated. An undue pro- 
portion of the act was taken up with the plan to prevent the control 
of the institution by any of the so-called interests. This was cer- 
tainly very elaborately safeguarded. 

James K. Lynch, 
Vice President First National Bank of San Francisco. 



Yes. My opinion is that the money spent for the National Mone- 
tary Commission was worse than wasted. The best way to " modify " 
it would be to put it in the fire. 

Harry B. Fish, 

Secretary People's Money League, Chicago, III. 



Yes. I think well of the plan and believe its operation would be 
beneficial and satisfactory. I see little real objection to the plan. 

J. H. Stewart, 

Wichita, Kans. 

Yes. My opinion is that the money we spent for the National 
Monetary Commission was worse than wasted. The best way tc 
" modify " it would be to put it in the fire. • 

Karl F. M. Sandberg, 

Chicago, III. 

I am familiar with this plan. It seems to me devised to create 
a money trust. The complicated method of electing directors gives 
an opportunity to designing men to get control of the money affairs 
of the Nation, to their own very great profit. The plan has been 
rejected by the principal political parties and can not be resurrected. 
Requiescat in pace. 

Theodore Oilman, 

New York, N. T. 

Yes; I am familiar with the recommendations of the National 
Monetary Commission. The suggestions are good, except that in 
order to be effective and accomplish the desired results your central 
organization must be in reality a central bank, not in the European 
sense, but central in the sense that it is the head to the banks of this 
country. Otherwise it will fail to accomplish what is desired. The 
national reserve association as recommended really would be a 
bank under another name. The plan as recommended, in my judg- 
ment, can be greatly simplified by simply forming your one-head 
organization and providing for a branch of that organization in 
every reserve center as business conditions of the country demand. 
These branches would all pay a part of your head, and under control 
of that head, and each bank should be allowed to deal direct with the 
nearest branch of this central organization for their convenience 
and for the convenience of the people they serve. 

J. R. Greenlees, 

Lawrence, Kans. 



REPLIES RECEIVED BY THE COMMITTEE. 119 

I have read the synopsis contained in the yearbook of the En- 
cyclopedia Britannica; am opposed to weakening the powers of the 
Government by a newly created United States bank called reserve 
association. 

SlGMUND Feust, 
President South Bronx Property Owners'' Association, 

New York City. 



Yes; I have fully read that report and the bill connected with it 
to incorporate the national reserve association. That report and the 
offering of such a bill is an insult to the American people. It pro- 
poses to make the national reserve association the fiscal agent of the 
Government, handling and having on deposit, on the average, about 
three hundred millions of the people's money; and then section 13 
reads : 

Sec. 13. The national reserve association and its branches and the local 
associations shall be exempt from local and State taxation, except in respect 
to taxes upon real estate. 

Surely a banker should not be required to pay any taxes. They 
never did. 

Sec. 24. The Government of the United States and banks owning stock in the 
national reserve association shall be the only depositors in said association. 
All domestic transactions of the national reserve association shall be confined 
to the Government and the subscribing banks, with the exception of the purchase 
or sale of Government or State securities or securities of foreign Governments 
or of gold coin or bullion. 

A fine mix-up with foreign affairs. 
Read section 25 : 

Sec. 25. The national reserve association shall pay no interest on deposits. 

Sure not ! Three hundred millions without interest ! The devil 
himself would not ask any more. 

Carl Pieper, 

Menomonie, Wis. 



QUESTION NO. 33. 

As one of several plans suggested to mobilize the banking reserves and 
provide elastic currency it has been suggested that the Treasury Depart- 
ment establish a division to be called the " Federal reserve division," 
which should conduct reserve agencies in each reserve city to exercise 
the functions of the proposed reserve banks ; receive capital from member 
banks to the extent of 10 per cent of their capital and surplus; pay 5 
per cent interest to the banks upon such capital, but without permitting 
the banks to manage the reserve agencies directly or indirectly; that 
such reserve agencies should discount short-term prime commercial paper 
and furnish Treasury-note currency where needed to member banks 
under reasonable safeguards to prevent inflation, thereby mobilizing the 
reserves and furnishing elastic currency directly to the qualified banks. 
This suggestion carries with it a more thorough examination of the 
national banks and makes the indebtedness to the Government by such 
banks a first lien on the assets of the banks. What do you think of such 
a suggestion ? 

ANSWERS. 

I am not in favor of the Government going into the banking busi- 
ness. It should get out instead of going in further. The banking 
business should be carried on by bankers, with strict regulations by 
the Government. 

The bankers do not object to regulations, but they do want a means 
of procuring currency for the payment of deposits and for meeting 
fluctuating demands for currency in crop-moving seasons, providing 
they have good and safe assets to secure such currency. 

S. H. BURNHAM, 

President First National Bank of Lincoln, Lincoln, Neor. 



The plan as outlined here would not do the work, in my judgment. 
The business of the country would not furnish the capital for an 
institution in which they had no say or share and which would be 
managed by what is known as politicians, to whom banks are some- 
times, I think, unnecessarily antagonistic. Any scheme that would 
make the indebtedness to the Government or anyone else a first lien 
on the assets of any bank would be a rank discrimination against the 
bulk of its creditors, the depositors, and would be an injustice that 
would not inspire confidence in depositors of banks in times of 
extreme stress or panic. These depositors might, through fear, 
demand their deposits faster than the Government or reserve associa- 
tions could print the money. 

I think this question of banking and currency legislation is the 
greatest, question before the American people to-day, by the side of 

120 



REPLIES RECEIVED BY THE COMMITTEE. 121 

which the tariff and all other questions sink into insignificance, and 
it should be approached with deliberation and caution. No currency 
should be permitted to be issued that is not as good as gold and have 
the Government guaranty behind it, and there should be ample 
security to protect the Government in the meantime, and nothing 
should be done to disturb the status of the ordinary depositor, who 
furnishes to-day 95 per cent of the credit and circulating medium, 
bank checks and drafts, to transact the business of the country, and, 
if possible to do so, his interest should be paramount to any other, 
or at least deemed equal to the bank-note creditors. 

Fred H. Quixcy, 
President Planters^ State Bank, Salina, Kans. 



I do not believe the Treasury Department should become so closely 
identified with the banking business of the country as is suggested 
by the establishment of a Federal reserve division. It is unwise and 
dangerous to have the central authority governing our financial 
system in any way connected with politics. Our commercial inter- 
ests could not afford to have the financial control of the country one 
of the rewards for party success. 

A. L. Mills, 
President First National Bank* Portland. Greg. 



If the central-reserve scheme is not adopted. I would be heartily 
in favor of something along the lines indicated. 

There is a pressing need for more elastic currency, as well as more 
plans b}^ which local banks can receive aid except in their reserve 
cities. In other words, our natural borrowing banks for this territory 
are Kansas City and St. Louis, but there might come a time in the 
future, as it has already in the past, where it would be impossible 
for us to borrow from either of these places, therefore, you can see 
how easy it would be to embarrass a local institution. 

I trust your committee will work out an intelligent plan by which this 
evil may be cured, and that in the future we will not be handicapped 
as we have in the past. It occurs to me that our currency system, as 
well as our banking laws, as a whole, are in bad form — antiquated, 
and, to a large extent, have outlived their usefulness — and it is time 
they should be remedied by a thorough overhauling, if necessary, that 
a radical change be made to cure the many existing evils. 

D. X. Fim. 
President Commercial National Bank. Muskogee, Okla. 



Why further commit the Government to entangle itself with 
business affairs, except to see that proper law is made and obeyed? 

Nationalize banking, and so permit proper classification of the 
business and its thorough examination and control. 

Wm. Ixgle, 
Vice President Merchants-Mechanics National Bank, 

Baltimore. Md. 



122 REPLIES RECEIVED BY THE COMMITTEE. 

Regarding the proposed Federal reserve division of the Treasury 
Department to conduct reserve agencies in each city, etc., I would 
say that there seems to be no more reason for the Government to 
conduct the banking business of the country than to operate rail- 
roads and manufacturing plants. The recent proposal to establish 
Federal reserve banks is a great step in advance over our present 
system and would afford a much-needed relief to the business inter- 
ests of the country. In my opinion, however, a central reserve asso- 
ciation on the general lines of the one proposed by the Monetary 
Commission would be much better, but best of all would be a bank 
of the United States. The banks of England, France, and Germany 
act for the common welfare of their respective countries, and in our 
case such an institution, serving only the banks of the country and 
the United States Government, would be a dignified and strong in- 
stitution and could establish and carry out a definite financial policy. 
With the Government a strong factor in its management, surely we 
can devise some plan by which it would not be dominated by private 
monetary interests. 

Robert D. Kent, 
President Merchants" Bank of Passaic, Passaic, N. J. 



I favor avoiding Government control as much as possible. Let 
the banks be the Government agents. The banks should manage the 
reserve agencies and make Government collections at no cost to the 
Government. 

The reserve agencies should discount commercial, cattle, grain, 
and packing-house paper, and bank paper when needed by its 
members. 

J. R. MULVANE, 

President Bank of Topeka, Topeka, Kans. 



It appears to me entirely impracticable for the Government to 
enter into the banking business in the manner suggested in the 
proposition — to establish a department of the Treasury to be known 
as the Federal reserve division. 

James K. Lynch, 
Vice President First National Bank of San Francisco. 



The partnership between the Ignited States Government and the 
banks of the United States should be dissolved without further 
delay. The Government does not need any partner. 

Harry B. Fish, 

Secretary People's Money League, Chicago, III. 



I do not favor the establishment of a Federal reserve division. I 
am against allowing a Government reserve agency making loans on 
commercial paper. There will come a time when the financial world 



EEPLIES RECEIVED BY THE COMMITTEE. 123 

will become top-heavy with so-called commercial paper, in my 
opinion. I don't want to see the responsibility for the issue of emer- 
gency currency all placed on one Federal agent. 

J H. Stewart, 

Wichita, Kans. 

The establishment of a Federal reserve division by the Treasury 
Department is a step in the right direction. 

Such a division should be established, not to oversee a reserve 
agency, but to conduct the reserve business. 

This division should have full control of the issue and redemption 
of national currency. 

It should receive through the several subtreasuries and direct from 
the banks all reserve funds not required to be kept in the home vaults. 

It should receive on reserve account nothing but 2 per cent national 
bonds, and should have at all times bonds equal in face value to the 
aggregate of all reserve funds in its custody. 

' Interest upon all bonds held by the reserve division should be 
collected for the benefit of the reserve fund. 

Interest at the rate of 2 per cent per annum should be credited to 
all reserve accounts quarterly, upon the average daily balance of 
each account, for the quarter last passed. 

Withdrawals of bank reserve should be paid by the issue of 
national currency, and bonds equal in face value to the notes issued 
should be canceled. 

The Treasury being relieved from the payment of interest upon 
all that part of the public debt represented by currency in circula- 
tion should prepare all currency and distribute the same through the 
subtreasuries and the mail, thus relieving the banks and the public 
from the exorbitant charges of the express companies. 

This plan would cause bonds to be in great demand, but so long as 
bonds could be obtained at the Treasury in exchange for currency, 
bonds could not go to a premium. 

Eugene Marshall, 

Manchester, Tenn. 

The partnership between the United States Government and the 
banks of the United States should be dissolved promptly. The Gov- 
ernment does not need any partner. 

Karl F. M. Sandberg, 

Chicago, 111. 

This seems to be another form of my suggestion in regard to adopt- 
ing the German method of handling this matter, which is private 
ownership and Government control. I firmly believe that this mat- 
ter should be divorced from the Treasury and put into the hands 
of a great banking organization, for the reason that the Treasury 
can not have powers that a bank must have in order to protect these 
reserves. I wish to call attention to the fact that it is not more 
money which we need, or more currency. When our records show 
$1,500,000,000, or nearly 50 per cent of all our currency, locked up 



124 REPLIES RECEIVED BY THE COMMITTEE. 

by law as reserve, that is proof enough of this assertion. Some or- 
ganization must be effected that will keep our reserves from being- 
piled up in the New York banks as they are to-day, for there is where 
our money scares come from, as it is impossible to move these re- 
serves out of New York quickly, because the minute they reach there 
they are loaned out on the stock market ; and we have at this moment 
the spectacle of the precious reserve fund of the country bank, prac- 
tically all of it being sent through other reserve centers to New York, 
because they are paying 2 per cent on daily balances for the use of this 
money, placing it in stock-market loans, which can not be collected 
except as the stocks which are up as collateral can be sold, and if 
the banks of the country to-day were to check $100,000,000 (which 
is only one-seventh of the deposits which they have in other banks 
and which are there in nearly every instance in order to get 2 per 
cent on their reserve) of this fund out, you would see a panic from 
one side of this country to the other inside of five days' time, because 
the New York banks can not meet a withdrawal of this amount with- 
out precipitating a panic, because they are forced to collect these 
funds before they can repay them to the country bank. I do not 
know why the Government of the United States should have a first 
lien on the assets of the. banks under this suggestion any more than 
I should. Make a sound system and provide an organization that is 
absolutely safe, not for the protection of the Government but for 
the protection of the individuals who compose that Government. 

I wish further to call attention to the fact that we have, under our 
present arrangement, nearly $1,500,000,000 of gold in the United 
States Treasury, which is securely locked up and safely guarded, 
and which in emergencies does the people no more good than if it 
were back in the mountains from which it came, because we have by 
law locked up $1,500,000,000 of the paper which represents that gold, 
which is supposed to be in the hands of the people, but which is 
locked up as legal reserve and can not be used without violating the 
law. Give us such an orgaigdzation for the head of our banks as out- 
lined, and deposit these huge sums in the organization, and the 
United States becomes immediately the strongest nation on earth 
financially instead of one of the weakest, as we are to-day. In addi- 
tion to these changes, why not take such steps as are needed to au- 
thorize your central organization to maintain a branch in the im- 
portant cities of other countries, especially South America, in order 
that we may no longer be handicapped by having to finance com- 
merce with these countries through London, as we are doing to-day 
in most cases. 

J. H. Greenlees, 

Lawrence, Kans. 

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